Could a Lenovo - Blackberry deal be a worry for Chinese rivals?

Discussion in 'Americas' started by amoy, Oct 21, 2013.

  1. amoy

    amoy Senior Member Senior Member

    Jan 17, 2010
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    Could a Lenovo - Blackberry deal be a worry for Chinese rivals?

    News that Lenovo, the world's largest PC maker, has signed a non-disclosure agreement to review Blackberry's books could spell trouble for its Chinese rivals as it would give Lenovo the much-coveted global market exposure that Chinese tech firms crave, analysts say.

    In late September BlackBerry agreed in principal to be acquired by its largest shareholder, Canadian insurance company Fairfax Financial, entering a six-week shop period where it can solicit, receive and enter into negotiations with other interested parties. The firm has since been linked with a string of potential buyers including Cisco systems, Google, Germany's SAP AG, and now Lenovo.

    Rumors of a deal have been circulating since January after Lenovo's chief financial officer first hinted that it might be interested in the troubled tech firm. Analysts have flagged that a deal could face regulatory hurdles from the onset, but if a deal did go ahead it could give Lenovo a further edge over its competitors.

    (Read more: Lenovo flirts with snapping up BlackBerry: DJ)

    "This deal could be a concern for Lenovo's Chinese rivals like ZTE and Huawei, who are all looking for more exposure in developed markets, where there are better margins and would provide much larger market," said Stephen Yang, a Hong Kong based analyst at Sun Hung Kai Financial Limited.

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    Lenovo considering purchase of BlackBerry
    Dow Jones reported Lenovo has signed a non-disclosure agreement to look at the books of BlackBerry and is actively considering purchasing the company.

    Lenovo's main business is in the declining industry of PCs, but its diversification into mobile devices last year has paid off for the firm. For the April to June period the firm reported its second-best quarterly earnings ever, with a net profit of $174 million, and is now the second largest smartphone provider in China, and the world's fourth largest smartphone maker with a 4.7 percent global market share, according to research firm IDC.

    Lenovo has made a foray into other emerging economies, including Russia and Vietnam, but is yet to crack the Western markets. Yang said a deal with Blackberry would help Lenovo fast forward the challenging and time-consuming process of gaining brand presence in developed markets.

    "They've talked about going to the U.S. and Europe. They could do this organically but it would take a lot of time and resources. Blackberry has about 550 carriers signed up globally, so a deal would help Lenovo leapfrog that process and give them instant access to developed markets," added Yang.

    (Read more: BlackBerry issues open letter to calm customers and partners)

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