Seher Hussain

The Wall Street Journal has reported that Lenovo, the world’s largest PC maker, is considering making a bid for BlackBerry. The Chinese company is said to have just signed a non-disclosure agreement that allows it to assess BlackBerry’s finances.

This piece of news is the latest development in what has been a tumultuous year for the Canadian company. In August it declared it would be reviewing strategic options and swiftly following this came the announcement of a proposed purchase that would see it being taken into private ownership by a consortium led by Fairfax Financial Holdings. That deal is currently in its due diligence period and during this time third parties can make alternative offers. Lenovo is the first company to actively declare it is interested in doing so.

Lenovo has previously expressed interest in bolstering its smartphone business, which currently plays second fiddle to its highly lucrative PC offering. The acquisition of BlackBerry would include a patent portfolio that some believe could be worth well over $2 billion (though others are less sure). For Lenovo the value of the patents would probably reside much more in the technology they might give access to, and the freedom to operate they would allow, rather than in monetisation.

But there is much more to BlackBerry’s IP than its patents. The Canadian company’s brand is also potentially very attractive. Lenovo’s $1.75 billion acquisition of IBM’s PC division in 2004 gave it the rights to utilise the IBM name for five years, enough time to ease the worries of ThinkPad consumers who had never heard of the Chinese company before. If Lenovo bought BlackBerry, it would obtain the company's trademarks, thus allowing it to offer BlackBerry branded phones and making use of a name with very high recognition in consumer markets around the world. And unlike the IBM deal there would be no time limit on usage.

Although Lenovo is a long way from a formal bid for BlackBerry, any such deal would be subject to extremely tough regulatory review. It’s reported that one of BlackBerry’s most fundamental assets, its secure network that is used to send confidential government and corporate emails, would likely be sold only to a North American entity given security concerns. Such issues have consistently bedevilled other Chinese companies, such as Huawei and ZTE in Europe and the US, as well as elsewhere. There are reports that similar concerns have also been an issue for Lenovo.

Although the purchase of BlackBerry may make sense for Lenovo, with the Canadian company’s IP giving it a major kick-start into a sector it has long coveted, political and security realities may make it a difficult deal to do. There are rumours that the company has been circling HTC as well, with the possibility of a joint venture or an outright takeover being mooted. Again, though, given the sometimes fraught relationship between China and Taiwan, it’s unclear if this is a viable option. Lenovo clearly sees acquisitions as a rapid means of accessing new technology, building a strong IP base and gaining market share. What is unclear is whether the Chinese company will be permitted to roll out its strategy.