In an interview that aired on Bloomberg News late last week, BlackBerry CEO John Chen said that he would not be able to accept a takeover offer from a Chinese company due to security concerns on the part of Western governments, which are among BlackBerry’s most important clients. In October, after sources indicated to the media that Beijing-based Lenovo was contemplating a bid, BlackBerry’s share price jumped 8.5 percent. Chen said, “One of our biggest install bases is government in the so-called Five Eyes countries where governments share intelligence. I think there will be a lot of regulatory issues and concerns.” The CEO was referring to the U.S., Canada, the U.K., Australia and New Zealand. He added that he “would prefer to build a lot of value before I even contemplate” selling the company. As for China, the Hong Kong-born Chen said recently that he would like to engage in partnerships with companies there in order to tap into its huge mobile market.

Tarifica’s Take

After BlackBerry’s dramatic loss of market share, which imperiled the company’s very existence, it adopted a strategy of tightly focusing on its core strength, security. This approach enabled it to target a lucrative niche market, governments and the military, and to win rich contracts in Western countries. U.S. President Barack Obama, German Chancellor Angela Merkel and British Prime Minister David Cameron all use BlackBerry devices. However, this newfound success has come at a price—restricting BlackBerry’s options in China. That is due entirely to Western governments’ suspicions of Chinese intentions; the U.S., for one, has frequently accused China of cyber-security violations, hacking and espionage. So BlackBerry would only be able to pursue an acquisition by a Chinese firm at the cost of all or most of its established Western governmental business. If it is to gain access to the gigantic Chinese mobile market, establishing partnerships with local entities is clearly the way forward.