BlackBerry shares up 4% after Facebook deal for WhatsApp

BlackBerry shares rose more than four per cent Thursday on news of Facebook’s purchase of mobile messaging service WhatsApp.

The $19 billion US in cash and stock Facebook is paying for WhatsApp – seen as a staggering sum by traders – suggests that the market may have underestimated the value of BlackBerry’s BBM messaging system.

BlackBerry stock was up 4.1 per cent to close at $10.41 on the TSX. The shares were up 3.8 per cent to $9.35 US in U.S. trading.

The spike began overnight, after Facebook reported its purchase of WhatsApp, a move seen as a way of retaining teen and young adult users who engage in online conversations outside of Facebook.

BlackBerry’s BBM rolled out to iPhone and Android users last year and now has more than 80 million users, compared to 450 million on WhatsApp.

The WhatsApp deal casts new light on the value of BBM, prized for its enhanced security.

The high price points to the value of messaging systems as a way of attracting new users, said Alan Lysne, entrepreneur-in-residence for the digital media program at the Ryerson University in Toronto.   

"You know it seems to be the new battleground for building a new user base," he said in an interview with CBC News. "Obviously BlackBerry has benefited from the news and I think any of the independent messaging companies out there that haven’t yet been acquired start to become a little more interesting."

At a $19 billion price tag, Facebook is paying $42 per user for WhatsApp. 

TD Securities analyst Scott Penner upgraded his own estimate of the value of BBM upwards to $800 million or $10 per user. In a note to investors, he said the Facebook deal “does highlight the value of messaging platforms.”

BlackBerry CEO John Chen has said BBM is one of the company’s core assets.

Tech analyst Carmi Levy reflected on the changing culture at the Waterloo, Ont.-based smartphone company, as reflected by Chen’s swift reaction to T-Mobile’s anti-BlackBerry ad campaign, after the U.S. carrier invited users to trade in their BlackBerrys for an iPhone.

Levy said he found Chen’s angry retort to T-Mobile “refreshing.”

“I think he was fully justified and I think that’s what you have to do. Given the context and the history of how BlackBerry has traditionally operated, it’s refreshing to see,” he told CBC News.

“If this had happened two, three years ago, the company would have simply said and done nothing. They would have let the firestorm play out outside of their walled garden.”

Levy said it is reassuring to BlackBerry’s enterprise customers to have a CEO who is outspoken in defending his product. It marks a different culture and mindset at the company, he said.

“In many respects, the old BlackBerry is gone, dead, buried and we’re looking at the existence of a different, new BlackBerry.”