With BlackBerry Up For Sale, Is Microsoft A Serious Buyer?

On Monday, BlackBerry, the struggling Ontario-based smartphone maker, announced that it was exploring a potential sale of the company, which has seen its share price plummet more than 90% since its peak. Inevitably, chatter immediately surfaced over how Microsoft could be a possible suitor, since the two have long shared underdog status in a mobile market increasingly dominated by Apple, Google, and Samsung.

As the rumor mill begins churning, however, it's important to note that this isn't the first time Microsoft has been said to be interested in pursuing BlackBerry. Several years ago, Redmond seriously considered acquiring BlackBerry, which was then called RIM, to prop up the company's mobile business, according to a former high-level source intimately involved in Microsoft's acquisition strategy. While this isn't surprising—it's been widely reported before—the thinking behind the acquisition exploration is telling, especially insofar as why Microsoft decided not to purchase BlackBerry. "We had board-level conversations about whether to make bids, and RIM certainly was an interesting conversation given its enterprise focus," explains the source, who worked closely with Microsoft CEO Steve Ballmer. "There were deep conversations about whether Microsoft should do that. Ultimately, we had enough concern about [RIM's] viability that we decided not to pursue it."

Arguably, not much has changed since then, other than the fact that BlackBerry would now likely be a much cheaper acquisition target. Microsoft's decision not to acquire the company has proved prescient. As Bloomberg reported recently, Microsoft's Windows Phone is making relatively big gains in the mobile space, even bumping BlackBerry from its third-place ranking in mobile market share. (To be clear, the two are still dwarfed by Apple's and Google's shares of the smartphone market.) Meanwhile, BlackBerry's new BB10 operating system and flagship Z10 smartphone have not resonated with consumers, despite some compelling design features.

In a press release published Monday, BlackBerry said it had formed a committee to explore a number of "strategic alternatives," including, "among others, possible joint ventures, strategic partnerships or alliances, a sale of the Company or other possible transactions." This leaves BlackBerry's future open to much speculation. Perhaps Apple, Google, or Samsung could be interested in BlackBerry's patent portfolio, as some have surmised. Or maybe its competitors are interested in acquiring the company for its talent, its enterprise market share, or for products like BBM. Or perhaps a surprise player, like Lenovo, might snatch up the company or partner with it to make a larger play for the mobile market in the U.S.

Regardless, when it comes to a potential Microsoft acquisition, it's worth recognizing the deliberations that went into the company's potential BlackBerry purchase the first time around. "The conversations were serious, but they were never external—we never hired bankers and there were no offers—because Bill [Gates] and Steve never thought it was a good idea," the source says. "I think we rightly said the partner approach was better."

What's more, according to the source, RIM wasn't even the most seriously considered acquisition target. "HTC, RIM, Nokia—all were viable candidates that were deeply considered," the source explains, adding that Nokia was perhaps more of a contender. "It would be very hard for Microsoft to let Nokia to fail—it’s their only horse in the mobile race."

Even so, Apple's success in controlling both hardware and software has attracted other players like Google, which acquired Motorola Mobility for $12.5 billion. There's been some suggestion too that Microsoft, with the launch of its Surface tablet, could be interested in getting more involved in the hardware business.

Still, the source says, Microsoft might think twice before making such a significant acquisition. "What Google did with Motorola is insane. Everyone was like, 'Oh it's about the patents.' It turns out that it wasn’t about the patents—they actually want to get in the business of building devices," the source explains. "That was an expensive way to do it. I think Microsoft thinks that if you want to build your own devices, you hire new designers, get new hardware guys, and do it."

"It’s a better path than acquiring a huge company with a completely different business model."

[Image: Flickr user Håkan Dahlström]

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2 Comments

  • enzomedici

    Anyone buying Blackberry is really stupid. You would really only buy Blackberry for its patent portfolio, but I'm not sure how much that is even worth these days. Apple is way too smart to buy Blackberry. It would have to be a company as dumb as Microsoft or Yahoo.

  • jayinatlanta

    I think that if Google or Apple make some kind of play for BB, Microsoft would have to acquire.

    As much as I admire their consumer efforts (love my Surface far more than my iPad, love my Xbox 360, really like my HTC 8X) Microsoft IS enterprise. I personally don't believe it can risk losing such an enterprise-specific company to the rivals who want to continue to make moves in the enterprise space.