BlackBerry to acquire Good Technology
Canadian communications giant buys U.S. rival for $425 million US
BlackBerry Ltd. on Friday said it plans to make its biggest purchase to date by buying Sunnyvale, Calif.-based rival Good Technology Corp. for US$425 million in cash, adding to a handful of recent acquisitions made during the past year to fortify and fill gaps in its nascent software business faster than if it tried building similar solutions and customer lists from scratch.
The Waterloo, Ont.-based company says it expects the transaction, which is subject to regulatory approval, to close late in its third quarter.
As of May 30, BlackBerry held US$1.2 billion in cash and cash equivalents. Since then, it bought San Mateo, Calif.-based AtHoc Inc. for an undisclosed sum.
BlackBerry, which has focused on securing devices, would gain more than 160 issued patents if it succeeds in acquiring Good and it would also make inroads into areas in which its performance has been lagging. It will add key accounts in the banking, aerospace and defence verticals, bolster its security of mobile apps, refine its cross-platform offerings and improve its sales network.
Notably, 64 per cent of Good’s activations are for a device running Apple Inc.’s iOS, a critical area in which BlackBerry has had limited penetration.
During a conference call Friday with analysts and investors, BlackBerry CEO John Chen said the marriage “perfectly fits” for various reasons, including that both companies have security in their DNA.
“We do MDM (mobile device management) well,” he added. “They do application management analytics well.”
Shares of BlackBerry jumped as much as five per cent in early morning trading in Toronto, but fell back later in the day. The stock has fallen 23.9 per cent so far in 2015.
Good, which serves more than 6,200 organizations in 189 countries with its mobile security solutions, filed IPO plans in May 2014 but postponed the offering amid worsening market conditions.
In fiscal 2014, Good posted sales of US$211 million and a net loss of US$95.4 million, according to filings.
BlackBerry expects to realize an estimated US$160 million in GAAP earnings from Good in the first year, including the impact of an anticipated writedown of certain deferred revenue and, according to Chen, a writeoff of what’s left to amortize from the US$267.5-million licence payment BlackBerry was forced to pay Good’s predecessor to settle a long-running patent battle. It was to be amortized through 2019.
Christy Wyatt, Good’s chief executive who wasn’t present on Friday’s call, described how Good and BlackBerry took varying approaches to security during an interview with the Financial Post in May.
“I’m not trying to pull in a device agenda or desktop agenda,” she said. “I don’t force customers to make infrastructure decisions. I have one focus: to secure your data, no matter what device it lands on, and we’re going to make that very usable for end users. And we tend to be pretty good at it.”
Chen said as much Friday. The turnaround specialist has promised to more than double sales of BlackBerry’s software division in fiscal 2016 to US$500 million and the acquisition of Good, like the others, propels him closer to what has been seen by some analysts as a lofty goal. He might not be done shopping, either.
“We’re continuing to look at opportunities that fit with our strategy,” Chen said.