Lenovo Faces Regulatory Roadblocks With BlackBerry Buy - InformationWeek

InformationWeek is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them.Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

08:47 AM

Lenovo Faces Regulatory Roadblocks With BlackBerry Buy

Lenovo would like to purchase the reach of BlackBerry's enterprise network. But it's unlikely to end up in China-based Lenovo's hands, security experts say.

Lenovo has signed a non-disclosure agreement with BlackBerry so that it may explore in detail the possibility of acquiring the troubled smartphone maker. BlackBerry is courting suitors in a bid to survive, but Lenovo's interest would draw regulatory scrutiny that could deep-six the deal.

According to The Wall Street Journal, Lenovo wants to buy all of BlackBerry, including the company's smartphones, patents, and enterprise network. The move could significantly bolster Lenovo's mobile enterprise cred. Lenovo has grown steadily since acquiring IBM's computer business in 2005, and adding BlackBerry's assets could make it a major player for the IT budgets of big businesses.

Security concerns, however, may prevent Lenovo from acquiring all of BlackBerry and it might have to settle for pieces of the business. Both Canadian and U.S. regulators would scrutinize the deal in detail.

[ For more analysis of BlackBerry's fall from grace, see BlackBerry: The Fax Machine Of Its Era. ]

BlackBerry's most valuable asset is its enterprise network, which powers the email and BBM messages that are sent from and received by BlackBerry smartphones. In the U.S., the Department of Defense still uses between 470,000 and 600,000 BlackBerrys. U.S. and state government officials together use about 1 million BlackBerrys in total, and President Barack Obama is among them.

Lenovo is based in China, which automatically raises national security red flags. Other Chinese firms, such as Huawei and ZTE, have struggled to acquire U.S. companies and expand their infrastructure businesses here. For example, U.S. regulators recently mandated that Sprint must divest some of its Chinese-made networking infrastructure in order for it to score a separate deal with SoftBank.

The likelihood of BlackBerry's enterprise network ending up in Lenovo's hands is small, according to security experts, who expect it will instead be sold to a company based in North America. Using the Investment Canada Act, the Canadian government has wide prerogative to veto foreign acquisition of a Canadian company if it feels the acquisition represents a national security threat or doesn't offer a "net benefit" to Canada. The Committee on Foreign Investment in the U.S. would certainly put such a deal through the ringer too. With BlackBerry's network off the table, that leaves little of real value to Lenovo.

Lenovo could pick up BlackBerry's smartphone business, but analysts think the flailing handset unit has no value. Lenovo already has a hardware business that churns out laptops, tablets and smartphones, and it's hard to see why it would need BlackBerry's hardware assets. BlackBerry's patents hold more value and might be worth Lenovo's efforts to acquire.

What Lenovo needs most is reach. Its mobile devices sell well in its home market, but not outside China. If Lenovo were able to continue using the BlackBerry name on its smartphones it might be helpful in the short term, but eventually that equity will play itself out. Without the enterprise network, it's not clear why Lenovo would bother pursuing BlackBerry's other business units.

BlackBerry already has one offer on the table, from Fairfax Financial. Since it made the offer, questions have arisen over Fairfax's ability to cobble together $4.7 billion. BlackBerry is also talking to Cisco, Samsung, Intel, Google and SAP, according to Reuters. Fairfax's offer has a November 4 expiration date, so other companies interested in BlackBerry need to speak up soon.

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
Comment  | 
Print  | 
More Insights
Newest First  |  Oldest First  |  Threaded View
User Rank: Author
10/18/2013 | 6:09:40 PM
re: Lenovo Faces Regulatory Roadblocks With BlackBerry Buy
On the contrary, the federal government, and particularly the Dept. of Defense, has a huge stake on what would happen to all those BlackBerry enterprise servers that handle sensitive DoD information. Do you think for a minute that DoD is going to stand by and let BerryBerry turn ownership of those servers over to the Chinese? I don't think so! If If Canada doesn't block the deal, one imagines the U.S. won't stand idly by.
InformationWeek Is Getting an Upgrade!

Find out more about our plans to improve the look, functionality, and performance of the InformationWeek site in the coming months.

10 Things Your Artificial Intelligence Initiative Needs to Succeed
Lisa Morgan, Freelance Writer,  4/20/2021
Tech Spending Climbs as Digital Business Initiatives Grow
Jessica Davis, Senior Editor, Enterprise Apps,  4/22/2021
Optimizing the CIO and CFO Relationship
Mary E. Shacklett, Technology commentator and President of Transworld Data,  4/13/2021
White Papers
Register for InformationWeek Newsletters
2021 State of ITOps and SecOps Report
2021 State of ITOps and SecOps Report
This new report from InformationWeek explores what we've learned over the past year, critical trends around ITOps and SecOps, and where leaders are focusing their time and efforts to support a growing digital economy. Download it today!
Current Issue
Planning Your Digital Transformation Roadmap
Download this report to learn about the latest technologies and best practices or ensuring a successful transition from outdated business transformation tactics.
Flash Poll