NEW YORK (The Deal) As Prem Watsa's Fairfax Financial Holdings reportedly tries to line up support to take BlackBerry (BBRY) private, industry watchers are questioning whether anything about the once-dominant mobile device maker is worth saving.
Media reports suggest that Fairfax, which has a 9.89% stake in the Waterloo, Ontario-based company, is talking to the Canada Pension Plan Investment Board about a bid.
But while Silver Lake Partners and Michael Dell might have a plan for Dell (DELL), it's hard to see what Fairfax will do, other than keep a Canadian company, with its 10,000-plus jobs, in business and in Commonwealth hands.
When BlackBerry said on Aug. 12 that it had hired JPMorgan Chase (JPM) and law firms Skadden, Arps, Slate, Meagher & Flom and Torys for help in reviewing alternatives, it also said that Watsa was stepping down from the board because of "potential conflicts."Fairfax and BlackBerry have been talking since then, according to a person familiar with the situation. A BlackBerry spokeswoman refused to confirm that, saying the company didn't comment on speculation. Fairfax didn't return calls seeking comment. Industry experts say that, as of now, BlackBerry's board is focusing on a sale of the entire company. Specifically, these people say, BlackBerry has not tried to separately peddle its approximately 5,000 patents. But that could change if no other workable option emerges. In fact, one industry source said that bankers had tried to determine what the company's IP might be worth to strategic acquirers and/or patent holding firms. The most obvious indicator of BlackBerry's decline is its share of the smartphone market, or rather lack of share, and one that is still on a steady slope downward. As of July, Google's (GOOG) Android operating system led off with a solid 51.1%, Apple's (AAPL) iOS captured 43.4%, with Microsoft (MSFT) pulling a distant third at 3.5% and BlackBerry barely nudging the needle at 1.2%, according to data released in September by Kantar Worldpanel ComTech. Or, as one observer succinctly put it, BlackBerry's business is "falling off a cliff." The results of the decline are well-documented. Two years ago, the company's shares were trading at about $30. Their recent 60-day moving average sits at around $11.50 per share. At the beginning of 2012, co-founders Mike Lazaridis and Jim Balsillie were pushed out of the company. BlackBerry's board arguably compounded the problems by sticking with its independent status and promotinig head of products development Thorsten Heins to the top slot rather than seek an outsider. The new chief presided over the release of the BlackBerry 10 to thunderous indifference. As Jefferies analyst Peter Misek wrote in an Aug. 19 research note, "We have been highlighting that developed market smartphone markets are saturated leading to decelerating shipments and pricing pressure...We had thought that BBRY's small BB10 shipment amount (<10% of APPL's) would allow it to buck this trend, but it failed to do so. Overall, we continue to believe there is excess inventory of high-end smartphones and weak demand." Misek had a $15 target on the stock at the time.
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