Lenovo Must Team Up With BlackBerry to Fight Apple and Samsung

NEW YORK (TheStreet) -- With all of the talk about the decline in the PC industry, Lenovo (LNVGY) continues to demonstrate what is possible when a smart management team combines vision with pinpoint execution. Lenovo's ADR was trading at $24.50 at 1 p.m. Thursday, up 0.2% for the day.

BlackBerry's (BBRY) main issue is its lack of vision and focus, on the other hand. At 1 p.m., the stock was trading at $7.31, flat for the day.

Together, though, Lenovo and BlackBerry could more effectively fight their joint enemies: Samsung (SSNLF) and Apple (AAPL).

Lenovo's strong history of reviving fledging businesses makes it the perfect candidate to realize the turnaround BlackBerry investors are hoping for.

BlackBerry CEO John Chen has been vocal about his desire to sell off the handset business. Lenovo is the right buyer -- and it's not afraid to spend.

Back in January, after announcing its acquisition of IBM's (IBM) x86 computer server business for $2.3 billion, Lenovo picked off Google's (GOOG) Motorola assets for $2.91 billion.

Although Lenovo is far from a household name, management has begun to address this with strategic deals leveraging its strong international presence to grow its U.S. footprint.

While speaking Thursday to the Wall Street Journal, Lenovo's Chief Financial Officer Wong Wai Ming said that even though its IBM and Google buys are yet to close, his company is open to more deals. And the company has more than enough capital to finance an acquisition. Wong Wai Ming also added:

"We keep our eyes open because M&A is like dating. If the right one comes to you and if you don't take it, he or she will go to somebody else."

He's absolutely right. While he stopped short of saying what business Lenovo may pursue, he shouldn't ignore a plum opportunity in BlackBerry.

With Lenovo shares down 12% since January, investors are unsure of the company's next direction. Some exited the stock, fearing management was spending too much. But following yet another earnings beat, now is the time for Lenovo to strike. BlackBerry should be the next target.

Although BlackBerry has shown some stability, selling 3.4 million smartphones in the most recent quarter, the company does not present any real threat to Apple (AAPL) or Samsung (SSNLF). For Lenovo, however, there are strong synergies already in place.

Last week, BlackBerry announced plans to sell its new handset model, the BlackBerry Z3, a cheaper phone with a low-cost touch-screen designed specifically for Indonesia. The phone is also aimed at expanding BlackBerry's position in emerging markets like Asia and South America.

These are markets where Lenovo can thrive. And when you factor BlackBerry's QNX services platform, which can be used as Lenovo's push into the realm of the connected car, this deal makes sense on every level. The only issue is the cost.

Lenovo has roughly $4 billion in cash on the balance sheet and another $455 million in borrowing power. Combine this with the company's recent bond offering of $1.5 billion and its $300 million in operating cash flow, you're looking at more than $6 billion in buying power.

BlackBerry has a market cap of $3.8 billion. Tack on a 30% to 40% premium, this deal can get done in the range of $5 to $5.5 billion. And in the process, Lenovo will achieve its ultimate goal, which is to narrow the gap between it and its rivals Apple and Samsung.

The only questions is, will BlackBerry sell?

At the time of publication, the author was long AAPL and held no position in any of the stocks mentioned.


This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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