WhatsApp Purchase Bloats Value of Blackberry’s BBM

by Matt Klassen on February 25, 2014

Facebook’s landmark US$19 billion acquisition of mobile messaging service WhatsApp appears to have given BBM, and by extension Blackberry, a serious shot in the arm, as finally the market has some sense of what the company’s greatest asset might really be worth.

In fact, following Facebook’s announcement of the WhatsApp purchase, Blackberry’s stocks jumped almost 10 percent in after-hours trading, because as Reuters explains, Facebook’s purchase “put a rough valuation metric around the smartphone maker’s own BlackBerry Messaging service.”

Looking at the numbers, Facebook paid a whopping $42 per average monthly active user of WhatsApp (450 million), and if such a valuation metric can be applied to BBM it would mean Blackberry is sitting on an asset worth $3.6 billion, not bad for a company with a total market capitalization of just under $5 billion.

But not so fast, some analysts say, arguing that Facebook grossly overpaid for WhatsApp, meaning that using such a purchase to establish BBM’s true value skews the results and that Blackberry’s single greatest asset is likely worth much, much less.

Earlier in the week, before the announcement of Facebook’s monumental WhatsApp deal, financial services firm Raymond James valued BBM at approximately $240 million, meaning with a reported monthly active user base of 80 million, BBM is valued at about $3 per user. But then Facebook comes along and pays $42 per active user on WhatsApp and the value of BBM (and any other messaging service) suddenly skyrockets.

While such a jump may have temporarily buoyed the spirits of the beleaguered Blackberry team, analysts warn that the company shouldn’t get too far ahead of itself. As Wells Fargo analysts Maynard Um noted, fellow messaging service Viber was recently acquired by global Internet services firm Rakuten for $900 million, giving that company a valuation of $8.57 per active user based on 105 million monthly active users. If we use that metric, BBM would be only worth $686 million.

So just how much is BBM really worth? Simply put, unless Blackberry decides to actually put BBM up for sale it’s hard to determine its worth, and as I mentioned, using WhatsApp as a valuation scale will likely only skew the results. Not only that, but analysts wonder if Blackberry’s own active monthly user numbers are even accurate, as the vast majority of BBM users, some 60 million, are holdovers from Blackberry’s legacy products, a sector that has been bleeding customers as they turn to better mobile alternatives. The remaining 20 million, it would stand to reason, are those who have adopted the service since it’s become available on other mobile platforms.

In the end, while Facebook’s acquisition of WhatsApp may have given the market some sense of what BBM might be worth; two key points need to be taken into account: Facebook grossly overpaid for WhatsApp, and BBM is nowhere near as popular as its messaging rival. Time to re-cork the champagne.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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