Bloomberg News

BlackBerry Rises as WhatsApp Deal Highlights Messaging Value (3)

February 20, 2014

The BlackBerry Logo Sits on a BlackBerry Smartphone

BlackBerry, which offers the BlackBerry Messenger instant-messaging service pre-installed on its phones or as a free download for iPhone and Android smartphones, reached as high as $9.82 in late trading yesterday after closing at $9.01 in New York. Photographer: Simon Dawson/Bloomberg

BlackBerry Ltd. (BBRY:US) rose after Facebook Inc. (FB:US) agreed to buy mobile-messaging startup WhatsApp Inc. for as much as $19 billion, highlighting the potential value of BlackBerry’s rival service.

Facebook said yesterday it’s paying $12 billion in stock, $4 billion in cash and $3 billion in restricted shares for WhatsApp, which lets users send messages through its services on mobile devices based on different operating systems. BlackBerry, which offers the BlackBerry Messenger (BBM) instant-messaging service pre-installed on its phones or as a free download for iPhone and Android smartphones, rose as much as 6.2 percent today to $9.57 before closing at $9.35.

The Facebook deal for WhatsApp, with more than 450 million monthly users, implies a valuation as high as $3.4 billion for BBM, which has 80 million monthly users. BlackBerry (BB) Chief Executive Officer John Chen, named to run the company in November after a scrapped sale attempt, has singled out BBM as a pillar for growth to help revive the struggling smartphone maker. BlackBerry has a market value of almost $5 billion.

“Facebook’s rich valuation per user for WhatsApp confirms that instant-messaging apps lead the next Internet gold rush,” said Praveen Menon, an Internet analyst with Bloomberg Industries. “The steep valuation could be a positive signal for rival messaging apps such as WeChat, Line and Kakao, as well as BlackBerry’s BBM service.”

WhatsApp Growth

BlackBerry rose 3.8 percent to $9.35 at 4 p.m. in New York. Yesterday, the stock reached as high as $9.82 in late trading. The shares have climbed 26 percent this year.

WhatsApp, which is popular in Europe and Asia, is adding 1 million users daily, and Facebook CEO Mark Zuckerberg said on a conference call yesterday that he expects the service to reach more than 1 billion people worldwide in the next few years.

Unlike traditional text messages, which consumers pay for through their mobile-phone plans, WhatsApp is free for the first year, and then costs 99 cents a year after that. Waterloo, Ontario-based BlackBerry made the BBM software available for free in October.

BlackBerry said Dec. 20 that more than 40 million users of Google Inc.’s Android and Apple Inc.’s iOS had registered to use BBM in the previous 60 days. Chen is now developing BBM channels -- essentially chat rooms devoted to specific themes -- that could carry advertising as a way of creating new revenue streams for the messaging service.

Valuation Range

Andrew Bocking, the former head of BBM, said in a May interview that it was too early to say when the service might make money. Bocking left BlackBerry earlier this month, and BBM is now being run by John Sims, president of BlackBerry’s Global Enterprise Solutions unit.

Victoria Berry, a spokeswoman for BlackBerry, said the company doesn’t have a comment on BBM’s valuation.

Maynard Um, an analyst at Wells Fargo & Co., said valuing BBM is tricky as the user base is changing so fast. Some BBM users are dropping their BlackBerrys for rival devices while the usage patterns of new Android and iOS BBM users may be hard to predict. BBM could be valued from $686 million to $3.4 billion, based on the purchase of the Viber Internet messaging and calling service and the deal for WhatsApp.

CEO Chen is more likely to focus on improving BBM than selling the service, New York-based Um wrote in a research note yesterday.

“Unless management plans to sell the unit, it is, in our opinion, difficult to add the incremental value given the unit is likely loss-making and will require investments,” Um wrote. “BlackBerry will look to monetize BBM through BBM channels in emerging markets and in regulated enterprises that need secure and monitored messaging rather than look to sell the unit.”

To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editor responsible for this story: Sarah Rabil at srabil@bloomberg.net


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Companies Mentioned

  • BBRY
    (BlackBerry Ltd)
    • $9.98 USD
    • 0.47
    • 4.71%
  • FB
    (Facebook Inc)
    • $76.11 USD
    • 1.42
    • 1.87%
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