Break up of BlackBerry becoming inevitable

Steven Loeb · October 10, 2013 · Short URL:

BlackBerry warming up to the idea after doubts over Fairfax deal surface

(Updated to reflect comment from BlackBerry, Samsung and 

All along, it seemed like the inevitable outcome of the BlackBerry sale would be that company would eventually be broken apart and sold for pieces. And now that is almost certainly what it going to wind up happening. 

In fact, even BlackBerry is now getting on board with the idea, despite accepting a proposed $9 a share offer from a consortium led by Fairfax Financial Holdings last month, which would have amounted to $4.7 billion. That is because there are now doubts about whether Fairfax can actually put that deal together.

And so now BlackBerry is beginning to accept the idea that, whoever does wind up purchasing the company, will likely break it apart, according to a report from Bloomberg on Wednesday.

This is not the first time this idea has been floated.

In September, reports came out that potential buyers, which were said to have included Canada Pension Plan Investment Board, Bain Capital, and Chinese smartphone and computer maker Lenovo Group, were only interested in certain parts of the company, including its patents and keyboard.

Last week some big names reportedly began showing interest in the company as well, including Google, Cisco, Samsung and SAP. At the time I wondered if, they too, would be more interested in buying only certain parts of the company, rather purchasing it outright.

Turns out, that is one again the case. Sources told Bloomberg that Cisco, Samsung and SAP are not interested in buying the whole company. 

And that makes sense, given how BlackBerry seems to be worth less than the sum of its parts.

According to what analysts, its messaging system could be worth between $3 billion and $4.5 billion, while its patents could be worth between $2 billion and $3 billion. Its  enterprise network could be worth $550 million to $1.1 billion. There is also another $2.6 billion in cash and investments.

The company itself is only valued as $5.4 billion.

That does not mean it will be smooth sailing from hear on out. Potentially interested parties seem to be hesitant to enter any deal to buy the company, and for good reason. Things have not been going well for a while not, and its latest quarterly earnings report was particually bad.

The company reported revenue of $1.6 billion, with a net loss of $965 million, or $1.84 a share. That seems all the more terrible when compared to the same time last year, when the company was seeing revenue of $2.9 billion and a loss of only $229 million, or 44 cents a share. Revenue dropped 45% in that time.

Sales during the quarter amounted to only 3.7 million smartphones. They have been so bad, in fact, that T-Mobile recently dropped the phones from its brick and mortar stores.

"The Special Committee, with the assistance of the Company’s independent financial and legal advisors, is conducting a robust and thorough review of strategic alternatives. We do not intend to disclose further developments with respect to the process until we approve a specific transaction or otherwise conclude the review of strategic alternatives," a BlackBerry spokesperson told VatorNews.

"Samsung is not considering the acquisition of BlackBerry," said a Samsung spokesperson, while a spokesperson from SAP declined to comment.

Cisco and Samsung could not be reached for comment. We will update it we learn more.

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