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BlackBerry Buys Good Technology

In its continuing transition from hardware to software and technology licensing, BlackBerry picks up a logical though somewhat "ironic" partner.

BlackBerry CEO John Chen announced that his company will acquire mobile device management (MDM) vendor Good Technology for $425 million in an all-cash deal set to close in November. This is the largest of BlackBerry’s recent acquisitions, which includes the $70 million deal in April for WatchDox and the $32.5 million purchase of Movitru in September 2014.

In the most recent quarterly results announced at the end of May, BlackBerry saw its year-over-year (YoY) revenue drop 32% from $966 million to $658 million; device shipments fell from 1.3 million to 1.1 million and now represent roughly 1% of worldwide smartphone sales. The company’s quarterly revenue peaked at $5.6 billion in February 2011, so revenues have fallen 88% in that span.

The one glimmer of good news was that software and technology licensing revenues increased from $74 million to $137 million. On a percentage basis that represents an increase from 8% to 21% of revenues.

At the time, BlackBerry reported it had $3.3 billion in cash and investments on hand.

Good Fit
Good should fit nicely with BlackBerry, as both companies focus heavily on enterprise mobile security. This, however, likely means a significant overlap in customer bases. Like BlackBerry, Good is most heavily represented in government, finance, and other regulated industries. The irony of the combination is that one of the factors that had accelerated BlackBerry’s device downfall was the ability for those security-sensitive organizations to let employees move from BlackBerries to Apple iOS devices using Good’s MDM solution.

Good is a longtime player in the MDM space and has made the Leader’s Quadrant in Gartner’s Magic Quadrant for Mobile Device Management (renamed Enterprise Mobility Management (EMM) in 2014) every year since 2011. In the 2015 Magic Quadrant, Gartner had this to say about Good Work, the successor to the Good for Enterprise PIM client introduced in 2014: “The current products do not yet contain all of the capabilities of the legacy products.” For 2014 and 2015, Gartner placed BlackBerry in the Niche Player’s Quadrant.

In April 2013, Good had a valuation of over $1 billion, and in May 2014, the company flirted with the idea of doing an IPO, though it never came to pass. At that point, YoY revenues were up 38% to $160 million. While 38% might sound like a good “bump," the other leading players in the MDM/EMM space cite growth rates twice that.

Good’s CEO, Christy Wyatt, had said the company is not profitable, but failed to provide specifics.

Glory Days
It is hard to see how BlackBerry could possibly regain its former glory, but if Chen can continue his transition program he may be able to keep the company alive. In the meantime, Good's Wyatt is a charismatic leader, and I wouldn’t be surprised to see her in a more “front and center” position with the combined company going forward.

The big challenge will be in somehow integrating two entirely different platforms, and delivering value to customers. Early versions of Good’s platform had not been the most popular among end users, though that has improved somewhat of late. BlackBerry’s most recent release of the BlackBerry Enterprise Service 12, BES12, came out in November 2014. BES12 took advantage of the Ubitexx acquisition in May 2011 with improved support for iOS and Android devices.

BES12 also allows for the consolidation of different BlackBerry devices into a single instance, where previous releases required separate versions of the BES depending on the type of device. However, if integrating the Ubitexx platform into the BES took more than four years, that doesn’t bode well for an integrated BES-Good offering.

In any event, BlackBerry is still standing -- though maybe not as tall as it once did.

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