Why Hewlett-Packard Company (HPQ) Needs BlackBerry Ltd (BBRY)

Stumbling points

HP has had its share of unfortunate acquisitions – more than 60, in fact, between 1999 and 2010 – including Autonomy, costing HP $11 billion, $8.8 billion of which ultimately had to be written off (HP has not been shy about overpaying for its acquisitions). Ms. Whitman is aware of the company’s spendthrift ways, and while she intends to use acquisitions to benefit HP, she also intends to keep the price for any acquisitions reasonable.

Another point to consider is competition. There are two companies that would be interested in acquiring smartphone production capacity: Lenovo and Microsoft Corporation (NASDAQ:MSFT). Microsoft had been interested in purchasing Nokia, the talks breaking off-but, surprisingly, it was announced on September 3 that Microsoft Corporation (NASDAQ:MSFT) had completed a $7.2 billion acquisition of Nokia’s handset operations and patents. BlackBerry, at approximately one-third the value of Nokia, could be a more attractive target for a company like Lenovo, which has a market cap of less than one-fifth the size of Microsoft’s.

Microsoft Corporation (NASDAQ:MSFT) does present another issue for a BlackBerry acquisition by HP, however: HP has a long history with Microsoft and its operating system. Recently HP entered into a collaboration with Microsoft Corporation (NASDAQ:MSFT) to promote the transition of its business customers from the popular Windows XP platform (support for which is scheduled to end on April 8, 2014) to a more up-to-date version of Windows. Moreover, HP’s business-oriented ElitePad tablet utilizes Windows 8.

Could its commitment to Windows preclude HP from offering a smartphone that had its own operating system (BlackBerry 10 OS)? I think not, as HP already offers Android with its Slate tablets, and is currently supporting the transition of Palm’s webOS to an open-source project.

Summary

Producing a smartphone is going to cost HP whether it develops its own or acquires a producer; the former will consume more time, the latter will cost more. In terms of entering the market on solid footing and being ready to compete, I believe acquisition is the better alternative, and BlackBerry’s availability seems like serendipity.

The article Why Hewlett-Packard Needs BlackBerry originally appeared on Fool.com and is written by Joseph Porter.

Joseph Porter has no position in any stocks mentioned. The Motley Fool owns shares of International Business Machines and Microsoft.

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