BlackBerry Fields Buyout Offer to Take Company Private, Turnaround Strategy Still Unclear

Jacob Harper  |

On Sept 22 beleaguered smartphone maker BlackBerry, formerly known as Research in Motion Ltd. (BBRY) fielded a takeover bid from private equity firm Fairfax Financial Holdings, who have offered a premium on the stock at $9 a share. Fairfax, who is currently a major stakeholder in the phonemaker, is offering up $4.7 billion for the company.

Following the takeover bid, analysts began to question frankly why anyone is interested in the company. They have completely lost the smartphone battle to Samsung and Apple Inc. (AAPL) and have shrunk from a market cap of over $83 billion at their apex to, according to Fairfax, around six percent of that.

The market, it seems, thinks BlackBerry is worth even less. Following the announcement shares rose 3 percent, but the following day corrected, losing 3.23 percent on Sept 23.

The question that lingers over the company is what exactly they will do now. Although they are largely debt-free and have cash reserves totaling around $2.6 billion stemming from their profitable salad days, the company is currently hemorrhaging cash, losing $500 million last quarter.

The company’s future certainly does not lie in smartphones, but probably in enterprise, the only market in which BlackBerry can still be considered successful, drawing a one million corporate phone order in March. Companies are attracted to Blackberry’s cheaper models and capacity to meet large orders. Also of interest is the company’s still popular messaging service.

Whatever happens, the BlackBerry is in desperate need of turnaround. They recently announced 4,500 in layoffs, and an expected $1 billion loss in Q2 2014.

Shares dropped to $8.53 on the day. 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.

Companies

Symbol Name Price Change % Volume
BBRY BB BlackBerry Limited n/a n/a n/a n/a
DMHI DMH International Inc 0.00 0.00 0.00 0
AAPL Apple Inc. 217.73 -3.23 -1.46 57,977,094 Trade

Comments

Watchlist

Symbol Last Price Change % Change
AAPL

     
AMZN

     
HD

     
JPM

     
IBM

     

What Is Petrolithium?

MGX Minerals explains the advantages of petrolithium and how they are helping to solve future problems today.