With only one buyout offer on the table, BlackBerry might break the company into pieces and sell them to competitors such as Cisco, Intel, Samsung and SAP.
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BlackBerry is beginning to digest the idea that it might not be able to sell the company to private investors in one fell swoop. Fairfax Financial Holdings, a private equity firm that offered $4.7 billion for the ailing smartphone maker, is having difficulty securing the money. The deal might not happen, which will leave BlackBerry with few options.
With the buyout in jeopardy, BlackBerry has contacted a handful of companies, including Cisco, Intel, Samsung and SAP, to see if they'd be interested in making a move. According to sources cited by Bloomberg, Cisco and SAP are mulling the thought, but aren't looking at the entire company. Instead, they'd pick BlackBerry apart for its individual business units.
Selling the company in pieces could net BlackBerry and its shareholders more money in the long run.
Looking at the individual components shows that BlackBerry still holds plenty of value. The company's wireless and smartphone patents could go for between $1.6 and $3 billion, say analysts at Raymond James Financial and MDB Capital Group. BlackBerry's enterprise network alone could be sold for $550 million to $1.1 billion. BlackBerry's $2.6 billion stockpile of cash is appealing, as is the fact that it has no debt. Sadly, BlackBerry's smartphone hardware business is not profitable, and it isn't considered to be an asset. Potential buyers are likely to simply shut it down.
On Oct. 2, Cerberus Capital Management, another private capital investment firm, expressed its own interest in BlackBerry. Specifically, Cerberus is looking to sign a confidentiality agreement with BlackBerry so it can more fully assess the company's potential. It wants access to BlackBerry's books so it can perform its own due diligence. Cerberus hasn't offered a price for the ailing smartphone maker, however. Fairfax's initial offer was for $9 per share.
BlackBerry first announced plans to explore strategic alternatives in August. It later warned of poor performance during its second fiscal quarter, and then delivered bad news at the end of September. BlackBerry raked in revenue of just $1.6 billion during its most recent quarter, which represents a painful 49% drop from the previous quarter. The company was forced to write down $1 billion in unsold Z10 inventory and posted a loss of $965 million. Worse, BlackBerry quadrupled the costs associated with restructuring from $100 million to $400 million.
Some analysts believe BlackBerry will burn through its cash stockpile in as few as 18 months. It plans to lay off 4,500 workers by the end of the year, and T-Mobile retail stores in the U.S. will stop stocking BlackBerry handsets.
The company hasn't commented on any of these developments other than to say that it is looking at all its options. The Fairfax deal's due diligence review period is set to expire Nov. 4. It's unclear if or when Fairfax will change that depending on the success or failure in its search for cash. Fairfax CEO Prem Watsa still hopes to make the acquisition work.
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