BlackBerry bidders consider patents
Cellphone maker’s intellectual property worth up to $3 billion
TORONTO Even as BlackBerry Ltd.’s sales tumbled in recent years, the company continued amassing patents, building an intellectual-property hoard that’s now central to its effort to entice bidders.
The struggling smartphone maker received 986 patents last year, a 49 per cent increase from 2011, according to figures compiled by the Intellectual Property Owners Association.
BlackBerry’s patents are valued at anywhere from $1 billion to $3 billion, depending on how many of them have already been licensed out, analysts and patent experts estimate.
Working in BlackBerry’s favour: The patents cover similar technology as Apple Inc.’s intellectual property, and much of the portfolio is only a few years old.
The downside is that the market for such assets has cooled.
Previous patent buyers such as Apple and Google Inc. amassed broad portfolios in patent deals two years ago.
“This is an incredibly volatile market,” said Ron Laurie, managing director of Palo Alto, Calif.-based Inflexion Point Strategy, who advises companies on patents. “It all depends on perceived demand and strategic value.”
A higher patent valuation would help the company as it seeks offers better than Fairfax Financial Holdings Ltd.’s tentative $4.7-billion buyout proposal, even if it means breaking the company up to get the fullest value for the assets.
Apple, whose iPhone is now the bestselling smartphone, cites BlackBerry’s technology 1,295 times in its own patent applications, according to MDB Capital Group LLC, a Santa Monica, California-based patent-investment bank. The rivals credit each other more than any other two North American device makers. Companies are required to identify competing technology to ensure they aren’t claiming something already patented.
Lisette Kwong, a Waterloo, Ont.based spokeswoman for BlackBerry, and Kristin Huguet, a spokeswoman for Apple, declined to comment.
Given its connections to Apple and an average patent age of just 3.4 years, the portfolio may fetch $2 billion to $3 billion, according to MDB. That value may be lower if BlackBerry has already licensed much of its technology, said ErinMichael Gill, managing director of MDB Capital. Widely licensed patents have less use for new deals or court challenges.
“If that’s the case, the financial buyers no longer have much interest, and the strategics don’t need them,” Gill said. “Then it would go from multibillion dollars to a trivial amount, probably just a few hundred.”
MDB’s estimate reflects what the patents would fetch as stand-alone assets without liabilities a buyer of the whole company would face. The cost of shutting the hardware unit could be $800 million, according to BMO Capital Markets.
Raymond James Financial Inc. pegs the value of BlackBerry’s patent portfolio at about $1.6 billion, with the phone maker’s enterprise network of servers at $550 million to $1.1 billion. Add those assets to the $2.6 billion in cash the company had at the end of last quarter, and you get close to the $4.7 billion Fairfax is offering.
BlackBerry, which redefined what a phone could do more than a decade ago, has been eclipsed by Apple and Samsung Electronics Co., which offered a slicker range of smartphones and tablets. BlackBerry’s share of the global smartphone market shrank to 2.9 per cent in June — down from 19 per cent four years earlier — and last quarter sales plunged 45 per cent from a year earlier.
Meanwhile, BlackBerry said Monday its popular instant messaging service is now ready for Apple’s iPhone and devices using the Android operating system, following a technical glitch that delayed the launch by about a month.
Fairfax, BlackBerry’s largest shareholder, is trying to line up financing and partners for its bid to take the company private. BlackBerry cofounders Mike Lazaridis and Douglas Fregin, who together control eight per cent of BlackBerry’s shares, said this month they’re also mulling a bid. Lazaridis holds 178 BlackBerry patents, according to MDB.
After signing a nondisclosure agreement, Cerberus Capital Management LP is in the early stages of considering an offer to acquire all of BlackBerry, a person with knowledge of the situation said last week. Lenovo Group Ltd. also signed a nondisclosure agreement and is actively considering a bid, the Wall Street Journal reported last week.
Fregin and Lazaridis declined to comment on any specific interest in the patents through their spokesman Mike Sitrick. Peter Duda, a spokesman for Cerberus, also declined to comment. Spokesmen for Fairfax and Lenovo did not immediately return messages seeking comment.
Patents last 20 years from the date of their application, making BlackBerry’s 3.4-year average appealing, Gill said.