BlackBerry Limited (NASDAQ: BBRY; TSX: BB) announced this morning that it has entered into a definitive agreement to acquire Good Technology for $425 million in cash. This move immediately strengthens the reinvented BlackBerry’s position as a provider of cross-platform mobile security services for enterprises. For Good, this acquisition was a logical, inevitable exit.
Back in the early days of enterprise mobility, BlackBerry ruled the market with its BlackBerry Enterprise Server (BES) and BlackBerry Messenger (BBM) offerings. However, those products were tied to the company’s hardware offerings. When BlackBerry’s share of the mobile phone market plummeted after the introduction of the iPhone and Android-based handsets, demand for BES and BBM also took a big hit, despite their technical strength.
Recently, BlackBerry has been reinventing itself as a provider of cross-platform mobile security services for enterprises. While the company has demonstrated some success in executing on that position, the market has remained skeptical. As Fortune’s Jeff Reeve’s pointed out this morning, BlackBerry is unprofitable with a lot of negativity priced into its stock. The company is currently valued at less than 1.3 times next year’s sales and only slightly above the cash on its books.
Clearly, BlackBerry needed to do something to bolster the credibility of its strategic market positioning. Today’s acquisition of Good Technology immediately strengthens both BlackBerry’s technical ability and street cred as a provider of cross-platform mobile security services for enterprises. Good’s portfolio of Enterprise Mobility Management (EMM) offerings was one of the best available and highly complementary to BlackBerry’s, as noted in the latter’s press release:
“Good has expertise in multi-OS management with 64 percent of activations from iOS devices, followed by a broad Android and Windows customer base. This experience combined with BlackBerry’s strength in BlackBerry 10 and Android management – including Samsung KNOX-enabled devices – will provide customers with increased choice for securely deploying any leading operating system in their organization.”
For Good Technology, this acquisition was a logical, if not inevitable, exit. As I wrote in A market overview of the mobile content management landscape (summary only; subscription required for full text) just over a year ago,
“Many platform vendors have already acquired MDM and MAM capabilities, so the viability of the numerous, remaining pure-play vendors of those technologies looks increasingly dim. Instead, future acquisitions by platform vendors are more likely to echo VMware’s recent (January 2014) purchase of AirWatch and its well-rounded suite of EMM technologies. MobileIron launched a successful IPO earlier this month and looks to remain independent for the time being. Good Technologies recently filed its own IPO registration paperwork but could be acquired either before or after the actual IPO.”
And so it is. MobileIron remains the last major independent EMM vendor standing and Good has been acquired. It seems that Good really had little choice. They were $24 million in debt when their filed their S-1 (16 months ago) and never completed the intended IPO. It is very likely that they continued to lose money since then. According to CrunchBase, Good had taken on an undisclosed amount of secondary market funding a month after the S-1 filing and received an $80M private equity investment in September, 2014. It’s highly likely that a combination of slowing revenue growth and a non-existent road to profitability led Good’s management and investors to take BlackBerry’s acquisition offer.
The looming question is will its newly-expanded portfolio of enterprise mobile security capabilities be enough for BlackBerry to accelerate its turnaround? Investors are reacting positively to the news. BlackBerry’s stock is currently up 1.54% while the broader NASDAQ is down -1.04%. Of course, only time will tell. Success will depend on how quickly BlackBerry can integrate Good’s technology into its own and how well they can sell the combined platform.