BlackBerry to Buy Good Technology for $425 Million -- Update
September 04 2015 - 12:44PM
Dow Jones News
By Ben Dummett
BlackBerry Ltd. on Friday said it would acquire Sunnyvale,
Calif.-based Good Technology Corp. for $425 million, bolstering its
mobile security offerings and eliminating a competitor in the
device-management sector.
Stung by the dramatic drop in fortunes of its smartphone
business since 2013, BlackBerry has been betting on increased sales
of software to secure and manage devices on corporate networks. The
planned purchase of closely held Good is by far the largest of five
acquisitions the Canadian company has made over the past year to
boost growth in this area.
BlackBerry's customer base totals more than 20,000 enterprises.
The purchase will give BlackBerry access to the 6,200 organizations
that Good serves, though they share some of the same customers.
Good's clients include Barclays PLC, Northern Trust Corp. and the
U.S. Navy.
The deal will also help BlackBerry compete against Citrix
Systems Inc., MobileIron Inc. and other companies in the
device-management space.
"By combining the two we felt this was probably the deepest and
best product set," BlackBerry Chief Executive John Chen told The
Wall Street Journal.
Merging the companies' operations will also generate significant
cost savings and should add to BlackBerry's earnings and cash flow
within the first year of the deal's closing, Mr. Chen told
analysts. The transaction is expected to close in November.
BlackBerry last November introduced the latest version of its
mobile device management software, which works across mobile
operating systems, including Google Inc.'s Android operating and
Apple Inc.'s iOS. But analysts have questioned demand for the
software, dubbed BES12, after the company surprised the market in
its fiscal first quarter ended May 30 by including revenue from
technology licensing as part of total software sales. That move
raised concerns about overall sales of BES12.
Mr. Chen said the Good deal will, like the company's other
recent transactions, add scale while boosting sales. Over the near
term, BlackBerry expects to return its focus on smaller acquisition
targets, Mr. Chen said.
Good, meanwhile, had struggled to complete an initial public
offering. It filed to go public in May 2014, showing a string of
operating losses and less than 12 months' worth of cash at its
then-current pace of cash spending and cash income. Based on Good's
2014 rate of operating cash burn, and the cash on its books at that
point, the company had about seven months' worth of cash.
At the end of May, BlackBerry had $3.32 billion in cash and
investments, up $50 million from the prior quarter.
BlackBerry, which offers technology allowing companies to
separate personal and company data on an employee's device, is
betting the deal will help it address the increasing use of Apple
Inc.'s mobile devices in the workplace, since Good has a bigger iOS
base.
In Good's latest quarter, 64% of new device activations for this
type of technology were for iOS devices, Mr. Chen said.
BlackBerry has had success cutting costs through layoffs and
outsourcing the manufacturing of its handsets, but it has struggled
to generate growth. The company posted a profit in its latest
quarter, but revenue tumbled 32% from a year earlier.
BlackBerry was up 1.2% to $7.55 Friday in New York. But the
stock is down about 18% since reporting its first-quarter results
in June.
BlackBerry said that it expects to realize about $160 million in
revenue from Good Technology transaction in the first year after
closing.
Write to Ben Dummett at ben.dummett@wsj.com
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(END) Dow Jones Newswires
September 04, 2015 13:29 ET (17:29 GMT)
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