Emerging Telecoms Director Ronald Gruia comments (via: Frost & Sullivan) below on Lenovo’s interest in BlackBerry.
The Lenovo interest in BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) is not really news, in fact Lenovo had had some discussions with BlackBerry in the past. However, to just give a bit of context, the Canadian Government recently nixed a deal that would have seen Egyptian tycoon Naguib Sawiris’ investment holding company Accelero buy the enterprise arm of MTS (Manitoba Telecom Services) for $520 million, citing some security concerns. It’s a bit ironic that the same government that tried bending the rules for Mr. Sawiris’ Wind Mobile (to ensure the survival of the fourth wireless operator that would keep the big three incumbents ‘honest’ with their pricing schemes) deemed him to be a security risk four years later. Industry Minister James Moore rejected the sale based on some national security provisions in the Investment in Canada Act.
Given this backdrop, even though Lenovo has manifested interest in BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) in the past, I believe that a sale can be quite difficult, although it cannot be readily dismissed. But BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) has several installations in information sensitive locations of the Canadian Government (and not just there, but also in the U.S., as President Barack Obama himself was not shy to tell the world he was a user). For the record, last year, Ottawa approved a Chinese firm’s purchase of domestic energy producer Nexen, but made clear it would block further investments in oil sands by foreign state-owned enterprises.
In conclusion, before one would even discuss the synergies of a Lenovo acquisition of BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB), it would be an imperative to consider the current environment and whether such a transaction would be allowed by the Canadian Government. In the telecom domain, the recent MTS Allstream Accelero offer’s rejection is a sign that Ottawa might not be as open minded as some folks believed it is, after allowing Huawei to be deployed at the Bell/Telus HSPA+ and LTE buildouts.
Why is Lenovo interested in BlackBerry?
Lenovo Group Ltd. (OTCMKTS:LNVGY) (HKG:0992) has grown to become the world’s fifth-largest smartphone vendor. But 98 percent of its smartphone sales still come from its home market. Lenovo Group Ltd. (OTCMKTS:LNVGY) (HKG:0992) hasn’t succeeded in overseas markets. Even in China, the company is facing stiff competition from rapidly growing Xiomi. Acquiring BlackBerry Ltd. (NASDAQ:BBRY) (TSE:BB)’s handset business could help Lenovo Group Ltd. (OTCMKTS:LNVGY) (HKG:0992) improve its presence in overseas markets.