Following months of struggle, smartphone company BlackBerry has announced that Fairfax, its largest shareholder with about 10% of the stock, has offered $9 a share in cash to buy the company.
According to BlackBerry, it has signed a letter of intent agreement for Fairfax to acquire the company subject to due diligence.
Michael Genovese, of MKM Partners, estimated that BlackBerry’s real value is only $7 a share. Of that, the company’s services division is worth $5 a share, Genovese estimated, while the operating system is $1 and the intellectual property is worth another $1 a share.
"We expect BlackBerry will soon go away as a handset brand and likely as a smartphone operating system too. The brand may only remain as part of the standalone BlackBerry Messenger application before long," Genovese wrote before the deal was announced.
The news comes as BlackBerry announced it was cutting 40% of its global workforce by laying off 4,500 employees in an attempt to slash costs.
Jan Dawson, chief telecoms analyst at Ovum commented: "Taking BlackBerry private doesn’t solve the fundamental problems at the company. First, the company’s device sales are cratering, and its announcement last week that it no longer intends to pursue the consumer market is essentially the death knell for this business.
"BlackBerry’s supply chain relies on scale for profitability, and it will never again be able to achieve the scale necessary to make money on devices. It’s likely that BlackBerry will be out of the device business entirely by the middle of next year. The next challenge is that BlackBerry’s other businesses are all to a greater or lesser extent dependent on its devices business.
It is reported that the company will face losses of around $995m last quarter amidst the poor sales of their Z10 model and this week’s leak of the BBM messenger app for Android and iOS.
Dawson continued: "BlackBerry Messenger’s installed base is entirely on BlackBerry devices, and its launch on iOS and Android was aborted over the weekend. It’s mobile device management business is entirely based on its ability to manage BlackBerry devices, and its cross-platform management is much less well established than those of major competitors like MobileIron and Airwatch. If you strip out BlackBerry’s use of its QNX operating system for BlackBerry devices, you’re left with a business that’s worth less than $100 million. About the only part of BlackBerry that looks to be worth a significant amount at this point is its patent portfolio, and that certainly wouldn’t justify the purchase price on its own.
He added: "Normally, companies are taken private in order to give a long-term strategy time to payoff without the hassles of short-term investor scrutiny. But BlackBerry’s key problem for the last couple of years has been the lack of such a long-term strategy. It simply hasn’t articulated a way to rebuild its business as its device sales drop precipitously. Unless Fairfax plans to radically change or accelerate BlackBerry’s strategy, it’s unlikely to be able to turn the company around. And that means we’re likely seeing the beginning of the end for one of the most iconic brands in mobile technology."
