BlackBerry likely to spend $814.9m award on acquisitions
BlackBerry’s arbitration award of $814.9m from its dispute with Qualcomm will potentially be used for acquisitions to expand the business.
BlackBerry Ltd.’s $815 million arbitration award in a dispute with Qualcomm Inc. is a positive for the company and it’s likely to use the money to seek acquisitions to bolster its business, analysts said Wednesday.

The sum is a material win for the mobile device maker US:BBRY BB, +1.31% that is working to transform itself into a software company, after its once successful smartphone franchise was hammered when consumers moved to Android and Apple AAPL, +1.01% phones.

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The binding decision means that BlackBerry will receive the entire sum, which is equal to about 20% of its current market cap, said Canaccord Genuity analyst Michael Walker.

“With BlackBerry planning to invest for growth in its software businesses, the surprising arbitration award and $815M in cash from Qualcomm QCOM, +2.13% will bolster BlackBerry’s balance sheet and increase the likelihood of acquisitions to augment growth,” Walker wrote in a note.

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TD Securities agreed, and said BlackBerry will likely target the Internet of Things and the security space for deals.

“We believe any acquisitions to build out BlackBerry’s IoT sales channel would be attractive,” analyst Daniel Chan wrote in a note. “Moreover, the cash could be used to continue to build out the company’s own sales team.”

The award is equal to $1.38 per share in value and will increase BlackBerry’s net cash per share to $3.23 from $1.85, he wrote. Chan is upbeat on BlackBerry’s turnaround, which is advancing thanks to momentum in enterprise software, large radar wins and new IoT opportunities. TD rates the stock a buy.

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But Canaccord’s Walker said his view of the stock remains unchanged and he is sticking with his hold rating, while raising his price target to 49.50 from $8.00. The analyst does not expect revenue from recent opportunities to become meaningful before fiscal 2019 or later.

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“While we remain impressed with overall expense controls and cash flow management, we view fiscal 2018 as another transitional year as the company builds its software business to offset the ongoing SAF (software access fee) revenue decline,” he wrote.

Earlier, BlackBerry said the two companies agreed to arbitrate a dispute last April on whether Qualcomm’s agreement to cap certain royalties applied to payments made by BlackBerry under a license agreement between the two. The hearing was held in San Diego, Calif., from Feb. 27 to March 3.

BlackBerry agreed in 2010 to make fixed royalty payments per device sold to Qualcomm, at a time when its smartphone sales were very strong and were expected to continue for the long term. When those sales failed to materialize in the face of competition from the iPhone and Android devices, the company argued that the royalty payments were excessive.

A final award, including interest and legal fees will be issued after a May 30 hearing.

BlackBerry Chief Executive John Chen welcomed the ruling and said the company is looking forward to collaborating with Qualcomm in security for ASICs and solutions for the automotive industry. Qualcomm said it did not agree with the ruling, but acknowledged that it was binding and not appealable.