BCS Barclays PLC

By Ben Dummett 

BlackBerry Ltd. on Friday said it would acquire Sunnyvale, Calif.-based Good Technology Corp. for $425 million, bolstering its mobile security offerings and eliminating a competitor in the device-management sector.

Stung by the dramatic drop in fortunes of its smartphone business since 2013, BlackBerry has been betting on increased sales of software to secure and manage devices on corporate networks. The planned purchase of closely held Good is by far the largest of five acquisitions the Canadian company has made over the past year to boost growth in this area.

BlackBerry's customer base totals more than 20,000 enterprises. The purchase will give BlackBerry access to the 6,200 organizations that Good serves, though they share some of the same customers. Good's clients include Barclays PLC, Northern Trust Corp. and the U.S. Navy.

The deal will also help BlackBerry compete against Citrix Systems Inc., MobileIron Inc. and other companies in the device-management space.

"By combining the two we felt this was probably the deepest and best product set," BlackBerry Chief Executive John Chen told The Wall Street Journal.

Merging the companies' operations will also generate significant cost savings and should add to BlackBerry's earnings and cash flow within the first year of the deal's closing, Mr. Chen told analysts. The transaction is expected to close in November.

BlackBerry last November introduced the latest version of its mobile device management software, which works across mobile operating systems, including Google Inc.'s Android operating and Apple Inc.'s iOS. But analysts have questioned demand for the software, dubbed BES12, after the company surprised the market in its fiscal first quarter ended May 30 by including revenue from technology licensing as part of total software sales. That move raised concerns about overall sales of BES12.

Mr. Chen said the Good deal will, like the company's other recent transactions, add scale while boosting sales. Over the near term, BlackBerry expects to return its focus on smaller acquisition targets, Mr. Chen said.

Good, meanwhile, had struggled to complete an initial public offering. It filed to go public in May 2014, showing a string of operating losses and less than 12 months' worth of cash at its then-current pace of cash spending and cash income. Based on Good's 2014 rate of operating cash burn, and the cash on its books at that point, the company had about seven months' worth of cash.

At the end of May, BlackBerry had $3.32 billion in cash and investments, up $50 million from the prior quarter.

BlackBerry, which offers technology allowing companies to separate personal and company data on an employee's device, is betting the deal will help it address the increasing use of Apple Inc.'s mobile devices in the workplace, since Good has a bigger iOS base.

In Good's latest quarter, 64% of new device activations for this type of technology were for iOS devices, Mr. Chen said.

BlackBerry has had success cutting costs through layoffs and outsourcing the manufacturing of its handsets, but it has struggled to generate growth. The company posted a profit in its latest quarter, but revenue tumbled 32% from a year earlier.

BlackBerry was up 1.2% to $7.55 Friday in New York. But the stock is down about 18% since reporting its first-quarter results in June.

BlackBerry said that it expects to realize about $160 million in revenue from Good Technology transaction in the first year after closing.

Write to Ben Dummett at ben.dummett@wsj.com

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(END) Dow Jones Newswires

September 04, 2015 13:29 ET (17:29 GMT)

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