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The Deal: Selling BlackBerry Will Be Just As Hard As Selling BlackBerrys

Stocks in this article: BBRY

So even if Fairfax has a tough task in convincing backers that BlackBerry can recover, the sales pitch will be even tougher because all those patents actually may not be worth much. The problem is that the time to get top dollar has likely come and gone. 

Kevin Rivette, founder of patent advisory firm 3LP Advisors, said the big issue for BlackBerry is how much of its patents were cross-licensed to industry rivals, thereby reducing their value to those same companies.

That cross-licensing ramped up after BlackBerry paid almost $613 million in 2006 to settle an infringement lawsuit brought by patent holding company NTP Inc., he said.

And the crest of big deals for patent portfolios has also washed by, Rivette said. 

There was Canada's Nortel Networks, which, in its liquidation process in 2011 sold some 6,000 patents to Rockstar Bidco, an entity composed of practically every single big tech company and then some: Microsoft, Apple, Sony (SNE), EMC  (EMC) and Ericsson (ERIC). BlackBerry, at that time known by its original name, Research in Motion, also participated. 

So there is the simple fact that, as one industry source said, all the relevant companies are "already armed with patents." 

And to make matters worse, the $4.5 billion Rockstar deal hasn't exactly rocked. The consortium is quietly trying to shop the patents, according to several people familiar with the situation, because the expected monetization isn't working out as planned. In addition, it now appears that the group overpaid, not taking into account issues like cross-licensing agreements, out of fear that Google might win the auction. 

Of course, what Google did was turn around and pay $12.5 billion for 17,000 patents from Motorola Mobility Holdings.

Since the Nortel and Motorola sales, InterDigital  (IDCC) tried to shop its 20,000 patent portfolio, seeking a similarly lofty valuation. But it failed to find a buyer and pulled that auction in January 2012. Later, InterDigital settled on a sale of a fraction of the portfolio, 1,700 patents, to Intel Corp. for $375 million in September 2012. 

And when Eastman Kodak Co. was facing oblivion, it tried to shop its patents, looking for a price of more than $2 billion. Ultimately those patents sold in December 2012 during the company's liquidation for $525 million to a huge consortium of tech players. 

And in one more big deal, AOL  (AOL) sold 800 patents for $1.1 billion to Microsoft in April 2012. But Microsoft's subsequent sale of the assets further demonstrates the softness of the market: Facebook  (FB) bought the lot for $550 million.

Pacific Crest Securities' James Faucette said in a Tuesday, Sept. 10, research note that BlackBerry stock is likely close to the value at which Fairfax bought its shares. With his calculations putting the company's tangible book value/share at $11.23, that would mean a market cap of about $5.9 billion, far below media estimates of $10 billion for the patent portfolio alone. 

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