While Nook’s marketing opportunities are exciting, greater sales gains might be found in Research In Motion Ltd (NASDAQ:BBRY)’s software subsidiary QNX. QNX has become one of the top developers for the auto industry with around a 60% share in the car infotainment market. Connected cars, those with built-in GPS, blue-tooth, and Wi-Fi, are expected to be a one of the fastest growing trends in mobile communication. While others like Apple Inc. (NASDAQ:AAPL), Google Inc (NASDAQ:GOOG) and even Microsoft are trying to gain a place in the space, QNX seems to have already made an enviable connection with most major auto makers.
Can BlackBerry and Nook and Microsoft work?
It looks like Microsoft Corporation (NASDAQ:MSFT) could gain a lot from acquiring BlackBerry and Nook. But will integration be easy? Probably not, but it does seem possible. With proper management and vision, Microsoft should be able to take the best from its disparate collection of assets and assemble them into a compelling ecosystem. Importantly, the company seems to have the staff, around 90,000 talented employees, the time and the money to do it.
The nice thing is that it looks like a very inexpensive gamble. Nook, with all its troubles, can probably be bought out cheaply. Microsoft already owns 17.6% of the business from a $300 million investment about a year ago. It’s likely the rest of the business could be had for not much more.
The purchase of Research In Motion Ltd (NASDAQ:BBRY), though significantly more expensive, is also easily affordable for Microsoft Corporation (NASDAQ:MSFT), which has over $74 billion in liquid assets and generates over $5 billion in free cash flow a quarter. A fair price for BlackBerry might be around $12 per share based on revenues around $11.0 billion, a net loss of around $200 million, adjusted cash earnings of $790 million and an extremely conservative 8 times multiple. This price, roughly $6.5 billion, could be partially funded by nearly $2.8 billion of Research In Motion Ltd (NASDAQ:BBRY)’s cash and adding some debt to its pristine balance sheet.
Conclusion
Research In Motion Ltd (NASDAQ:BBRY) and Nook don’t seem to have much of a future as stand alone businesses, but they do have valuable assets, maybe most useful to Microsoft. The integration of these assets wouldn’t be easy, but their acquisition is quite affordable and could help Microsoft successfully build on its premier position in corporate computing.
The article BlackBerry & Nook: An Accretive Opportunity for this Software Giant? originally appeared on Fool.com and is written by Bob Chandler.
Bob Chandler has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft Corporation (NASDAQ:MSFT). Bob is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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