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If WhatsApp can fetch $19B, what's BlackBerry's BBM worth?

Facebook's acquisition price values WhatsApp at roughly $42 per user. But one analyst warns that applying the same calculation to BBM might be too generous.


You might think that Facebook's acquisition of WhatsApp for $19 billion suggests that BlackBerry is sitting on a gold mine with its BBM messenger service.

Well, not so fast.

Facebook shocked the market on Wednesday with the purchase of messaging app WhatsApp in a deal that included $16 billion in cash and stock, and another $3 billion in restricted stock that would vest over the next four years.

The deal set a new, much higher benchmark on the valuation of mobile messaging companies. Based on the $19 billion figure, Facebook acquired WhatsApp for $42 per monthly active user (450 million).

Which brings us back to BlackBerry's BBM service. While BBM started out as a proprietary feature for BlackBerrys, the company last year opened it up to iOS and Android users through an app, garnering a great deal of buzz and no small amount of adoption. As of October, BlackBerry had reported more than 80 million monthly active users.

Based on WhatsApp's valuation, BBM would be worth $3.4 billion.

That's a jaw-dropping number for a company that has a total market capitalization of just under $5 billion. Shares of BlackBerry are up nearly 6 percent to $9.52 in premarket trading.

But the folks at BlackBerry shouldn't be jumping for joy just yet.

Wells Fargo analyst Maynard Um noted that another messaging app company, Viber, was acquired recently by global Internet services company Rakuten for $900 million, giving it the more modest valuation of $8.57 per user based on 105 million monthly active users (the folks at Viber must be kicking themselves). Based on that valuation, BBM would only be worth $686 million.

At 80 million users, BBM lacks the scale of a WhatsApp, and as Facebook demonstrated, valuations can rise or fall dramatically based on how large a base of users you command.

Um also cautioned against using either calculation in accessing BBM's value. He estimates that 60 million BBM users come from the legacy BlackBerry side, where people have been jumping ship given the uncertainties with the company and the increasing appeal of rival platforms. The rest of the users came aboard recently when BBM was opened up to Android and iOS, making it difficult to judge their value.

For now, it doesn't look like BlackBerry is considering the sale of BBM, with CEO John Chen reiterating the importance of the messenger service to the core of its business, which Chen is repositioning to focus more on software and high-end business clients. BlackBerry will likely look to make more money off the service through its BBM Channels initiative and in businesses, which could use a secure messaging service, Um said.

"Unless management plans to sell the unit, it is, in our opinion, difficult to add the incremental value given the unit is likely loss making and will require investments," Um said.

Still, it's an interesting exercise in exploring a what-if for BlackBerry, and it's good to know there are potential options for the company.