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Readers of this blog will recall last week’s post on the International Data Corporation‘s (IDC) report on the mobile phone market.  The problems for both Microsoft and Blackberry were exposed again for all to see.   Microsoft’s Windows Phone market share at 3.7%, would have been even smaller without Nokia. Blackberry’s situation was even more dire.  A few months back Microsoft and Blackberry opened another new patent war on each other, as if this would somehow help their situations.
This week Blackberry has announced the inevitable search for a potential buyer to take the company private, as has also happened recently with Dell Computer. The suggestion that Ballmer and Microsoft should consider purchasing Blackberry is actually a potentially very interesting idea.   A broader market consolidation, with much larger implications, may be on the horizon.

The enemy of my enemy is my friend: Should Microsoft buy BlackBerry?

BlackBerry was the undisputed king of thesmartphone market for years. Now, after ceding themajority of its marketshare and valuation to Apple and Samsung, the company hasput itself up for sale. Speculation that it will be acquired by Microsoft, its primary competitor for the bottom of the market, runs rampant, partly because the two companies are said to have considered such an arrangement before.
So hypothetically, if that deal goes through, what would a world in which Microsoft acquires BlackBerry look like? In theory, the two would be able to combine their strengths — those being Microsoft’s growing media empire, and BlackBerry’s experience developing hardware — and finally pose a threat to Apple and Samsung. In practice, such a world is unlikely to exist, largely due to the capricious smartphone market.
Microsoft needs Nokia. The smartphone-maker’s products are said to represent 80 percent of globalWindows Phone handset sales. Nokia warned investors in March that a Microsoft-built phone could threaten its business; it’s unlikely to stand by if Microsoft acquires BlackBerry and puts the company’s decades of experience with hardware to use. (Never mind how delighted consumers and investors might be to see Nokia cut ties with Windows Phone.)
Nokia CEO Stephen Elop is already under pressure from shareholders to “choose another road” lest it find its way to hell — it isn’t hard to imagine that sentiment being expressed louder and louder if Microsoft were to acquire BlackBerry.
The idea that Microsoft and BlackBerry would simply combine their marketshare and begin posing a larger threat to Apple and Samsung is flawed. Microsoft would have to leave BlackBerry alone, allow it to build the same products it’s been building, and perpetuate a business that put the company in a position to be acquired in the first place for that to happen.
Assimilating BlackBerry into Microsoft and using it to create Windows Phone products might alienate users who still appreciate BlackBerry’s phones and operating system. Making Windows Phone resemble BlackBerry’s software might do the same to all the people who like Microsoft’s mobile operating system. A combined company might be able to find a middle ground that leads to future gains, but it’s unlikely that the new marketshare could be found by combining the current numbers.
And then there’s Microsoft’s newfound emphasis on devices and services. Microsoft CEO Steve Ballmer is reorganizing the entire company to make devices like the Xbox and Surface tablets central to its purpose — bringing BlackBerry into the fold might facilitate that process, but it could just as easily cause problems.
Or again, if the two companies are kept separate, why bother purchasing BlackBerry in the first place? (Insert “for the patents, stupid!” comment here.) It’s not like the company developed a tablet that proved to be more popular than Microsoft’s Surface tablets, and people aren’t exactly lining upto purchase its latest smartphones, either. As “a former high-level source intimately involved in Microsoft’s acquisition strategy” tells Fast Company:

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. 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.

Could Microsoft acquire BlackBerry and turn it into something useful? Probably. BlackBerry’s patents, its enterprise-facing products, and its broad reach could be appealing to any buyer willing to pay the proper price. But such a deal is unlikely to change BlackBerry’s slide to the bottom of the smartphone market — and, since Microsoft has made gains because of that slide, slow Microsoft’s already sluggish ascent.

Post Author: David Mayes

Founder, Mayo615 Technology Partners Ltd., UBC adjunct faculty, Intel alumnus, technology assessment, international business, cleantech, fly fisherman, native Californian and citizen of France, who has been very fortunate to have traveled, lived and worked all over the globe. My wonderful wife, Isabelle has reintroduced me to my French Provençal heritage.

2 Replies to “The Enemy of My Enemy is My Friend: Should Microsoft buy Blackberry?”

  1. Has there ever been an example where joining together a bunch of troubled companies revitalizes the new entity? I’m sure there is; I just can’t think of it.
    However, if I were a gambling man I’d only count on Phoenix rising from the ashes in ancient mythology!

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