On Friday, BlackBerry Limited announced that it has entered into a definitive agreement to acquire Good Technology for $425 million in cash. Good’s technology will integrate with BlackBerry’s enterprise portfolio and trusted global network. It’s amazing the difference a week makes. As I was structuring my thoughts on Good Technology for an upcoming Lopez Research market research report, I noted that Good Technology was running out of options and would need to pursue a sale. The rapid plummet of MobileIron’s stock meant (hovering at a market valuation of $310 million after a $900 m IPO) it was nearly impossible for Good to IPO. Also, it was unlikely that Good's investors wanted to plow more money into a beleaguered EMM market. Hence, the best option for Good was a sale before it ran out of cash.
Good Technology Statistics Worth Noting
- 2,000 Good secured applications (The company’s S1 filing reported 1,600 plus but the number has grown.)
- 6,300 customers
- 16,000 Good Dynamics developers
- 94 percent renewal rate
- 50 percent of Fortune 100 use Good
- 50 percent of sales are through the channel
BlackBerry: An Unexpected Acquirer.
The industry has speculated so much on potential acquirers for BlackBerry that it hadn’t occurred to many that BlackBerry would be willing to make a large acquisition. BlackBerry had a war chest of roughly 3 billion in cash that it can use to acquire technologies. Within the past two years, it has acquired Secusmart, Movirtu and WatchDox ($70 m). While I expected at least two more acquisitions, the size of this acquisition was larger than expected.
I had speculated that Good would end up as a technology sale to Samsung to bolster its services business. Of course, there are many reasons why this type of sale would’ve been difficult. Other likely candidates included HP or a Managed Service Provider that could use Good to expand on a mobility service business.
What's In It For BlackBerry?
While it's obvious what Good gets out of the deal, many may be wondering what BlackBerry achieves given the apparent product overlap. The acquisition:
- Reinforces BlackBerry's position in its target customer base. Many security conscious and highly regulated industries such as financial firms, defense, and healthcare firms use either BlackBerry or Good. Despite widespread cynicism
and complaints of a poor user experience, Good has retained a bulk of its clients as stated in its 94 percent renewal rate. BlackBerry is a trusted mobility partner of all G7 governments, 16 of the G20 governments, 10 out of 10 of the largest global banks and law firms, and the top five largest managed healthcare, investment services, and oil and gas companies. - Bolsters BlackBerry's security business overall. As I've noted in other Forbes articles, BlackBerry is a security company. The acquisition of Good is aligned with BlackBerry’s strategy Mobile device and application management are critical components of that strategy. While it was catching up in Enterprise Mobile Management (EMM) features, BlackBerry was still viewed as an Mobile Device Management (MDM) provider. BlackBerry was particularly interested in Good’s SDK for containerized MAM. It also was pleased with the amount of application vendors that have used Good’s SDK to secure apps. The Good platform has more than 2,000 independent software vendor and custom applications built today.
- Better iOS and Android support. According to various reports, roughly two-thirds of Good Technology users are on
Apple's iOS. Good is also the only company certified as Common Criteria Evaluation Assurance Level 4 Augmented (EAL4+) for mobile collaboration on both iOS and Android. These two items combined benefit BlackBerry on both mobile OS and overall security support. - Partnerships should benefit. This deal should reinforce the BlackBerry-Samsung partnership. While the company still offers phones, it continues to focus on a software and services play, making it a better partner for hardware manufacturers.
Mobile Market Challenges Remain
The mobile market is tough. Acquiring a company isn't enough to ensure long term success. While the extent of any service changes can’t be discussed until the transaction closes in November. BlackBerry has said it plans to run both services until it can build a unified platform. Therefore, Good customers have little to worry about in the short term. However, building a unified platform on the other hand will be difficult at best. Each of these solutions has merit, but the company simply can’t mash them together. Once the acquisition closes, the company will have to make touch decisions about what stays and what goes. Good provides a small revenue stream that requires major cost cutting.
BlackBerry expects Good to contribute $160 million in GAAP revenue the first year, including the impact of an expected write-down of certain deferred revenue of Good. One challenge is that Good reported US$ 211 million sales with a US$95.4 million in net loss. The company needs to rationalize expenses to make this revenue beneficial. Even with these challenges, a tie up between BlackBerry and Good is probably the best that Good and its customers could’ve wished for. I don't think
