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Lenovo will face obstacles in any BlackBerry deal: source

The logo of Lenovo is seen on a computer monitor during a news conference in Hong Kong May 27, 2010. REUTERS/Tyrone Siu
The logo of Lenovo is seen on a computer monitor during a news conference in Hong Kong May 27, 2010. REUTERS/Tyrone Siu

By Nadia Damouni and Euan Rocha

NEW YORK/TORONTO (Reuters) - Chinese computer maker Lenovo, which has signed a non-disclosure deal to examine BlackBerry's books, faces regulatory obstacles if it bids for all of the company and will likely pursue just parts, a source familiar with the matter said on Thursday.

BlackBerry Ltd said in August it was exploring options that could include an outright sale. And the Canadian company, which helped pioneer smartphones, has since been linked with a string of potential buyers from private equity firms to rival technology companies.

Its shares, which rose 4 percent after the Wall Street Journal first reported the interest from Lenovo Group Ltd, ended up less than a percent at $8.20 on the Nasdaq.

Multiple sources close to the matter have told Reuters BlackBerry is in talks with Cisco Systems Inc, Google Inc and Germany's SAP AG among others, about selling all, or parts of itself. The potential buyers have all declined to comment.

None of these technology companies have made a formal bid for BlackBerry yet. However, industry experts believe that, while these players might not be interested in all of BlackBerry, they are keen on at least some pieces that would mesh well with or expand their own businesses.

Two sources said they expect some of these strategic players to be paired in bids for BlackBerry, depending on their level of interest its hardware and network assets.

Such a deal would be an alternative to a preliminary, $9-a- share offer by a group led by BlackBerry's biggest shareholder, Canada's Fairfax Financial Holdings Ltd. Earlier this month, co-founders Mike Lazaridis and Douglas Fregin said they were also considering a bid.

TOUGH REGULATORY REVIEW

The sale of BlackBerry, or any of its assets will likely undergo tough regulatory reviews in both Ottawa and Washington.

Most security experts believe BlackBerry's most vital asset, a secure network that handles millions of confidential corporate and government emails every day, is likely to be sold to a North American entity because of the security concerns. Its less contentious handset business, however, could be shopped to an Asian device maker.

Under the Investment Canada Act, the federal government has wide ranging powers to veto any foreign takeover of a Canadian asset or company if it deems such a deal would not bring a "net benefit" to the country, or if it believes a deal might pose a threat to national security.

Last week, Canada blocked an Egyptian telecommunication entrepreneur's bid to acquire the Allstream fiber optic network owned by Manitoba Telecom Services Inc, citing unspecified national security concerns.

Industry Minister James Moore declined comment on the Lenovo interest in BlackBerry.

LENOVO INTEREST

BlackBerry, based in Waterloo, Ontario, virtually invented mobile email with its first pagers, but it has rapidly lost market share to rivals in recent years.

Its latest results highlighted disappointing sales for a new line of devices the company initially saw as its way to win back market share from Apple Inc's iPhone and the numerous devices powered by Google's Android operating system.

And senior Lenovo executives have on more than one occasion expressed an interest in acquiring BlackBerry, or parts of the company, as it would help boost their own smartphone business.

In an interview at the World Economic Forum earlier this year, Lenovo Chief Financial Officer Wong Wai Ming told Bloomberg the company would consider a bid for BlackBerry.

Lenovo downplayed the comments at the time, saying that Wong was speaking broadly about Lenovo's M&A strategy.

A spokesman for Lenovo declined to comment on news of the company's renewed interest. BlackBerry said it is conducting a thorough review of its alternatives and that it does not intend to disclose further developments until it approves a transaction, or otherwise concludes the review.

The Wall Street Journal said Lenovo was looking at a bid for all of BlackBerry, which includes its faltering hardware unit, along with its security-focused service businesses and a string of hard-to value patents.

(Editing by Andre Grenon and Janet Guttsman)

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