Beleaguered handset manufacturer
Research In Motion Limited
) has offloaded its cloud content service unit NewBay to
Synchronoss Technologies Inc.
) for a cash consideration of $55.5 million. This divesture is
viewed as a part of Research in Motion's restructuring effort,
which includes selling its non-core business.
NewBay Inc., a wholly-owned subsidiary of Research In Motion,
allows its customers to safely store, share and deliver content
like photo albums, video social networking across smartphone and
tablets. NewBay's cloud services are delivered to millions of
users and have the top telecom carriers of Europe, North America
and Asia as its customers.
Waterloo, Ontario-based Resrach In Motion had acquired NewBay in
2011 for approximately $100 million to better compete with the
big cloud-based players like
). However, the company is offloading it at a much lower price,
which translates into a loss of $45 million approximately. The
transaction is expected to close at the end of fourth quarter of
On the other hand, the deal will be quite beneficial for
Synchronoss as the integration of NewBay will allow it to become
a leader in providing cloud-based mobile content services for
mobile carriers around the world. Additionally, they will get
NewBay's rich customer list, which includes
Vodafone Group Plc.
Verizon Communications Inc.
), among others.
The Canadian company is betting on its new Blackberry 10 OS-based
devices, which are slated to release in the first half of 2013.
If the new smartphone with its new developed feature is able to
lure more enterprise clients then it could be a potential game
changer for them, particularly in the lucrative North American
The struggling Canadian smartphone manufacturer is going through
a restructuring process by reducing its global work force by
nearly 2000 and plans to improve the effectiveness of its
resources thereby saving $1 billion by the end of 2013.
We believe getting rid of the NewBay business is part of Research
In Motion's broader restructuring plan as the company focuses on
offering the right smartphone to its customers. This divesture
signals that Research In Motion could offload many such non-core
assets in the future which it had acquired during its glory days
to improve its ailing cash position.
We maintain our long-term Neutral recommendation on Research In
Motion. Also, the company currently retains a Zacks #3 Rank,
implying a short-term Hold rating.
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