BlackBerry Is Worth More Than $9: Opinion

NEW YORK (TheStreet) -- Like Canadian sunshine in September, BlackBerry's (BBRY) valuation vaporized quickly in the last month. Almost a little too quickly when you consider the $1 billion loss announcement is almost exclusively made up of inventory writedowns.

Who in his right mind shuts down retail operations at the end of September with plenty of inventory and the lights still on? The fourth quarter is the biggest sales quarter of the year. It's so big and important that many companies' profit for the entire year is made during the final quarter's sales.

In my last BlackBerry article, I checked and reviewed my numbers several times before writing my estimated $11.50 per share buyout valuation. I also seriously questioned the timing of the announcement in light of the fourth quarter starting next week.

I wrote:

"Shutting down consumers sales this time of year doesn't make sense me unless one of two scenarios exist. BlackBerry has found a buyer willing to take the rest of the company and it doesn't want the drain of consumer sales/shutting it down and the unpleasantries of laying off 4,500 workers. Or... Sales of handsets are so bleak and burning through cash at such an accelerating rate that management believes even the best selling season of the year will result in increasing losses. It's hard to imagine sales have imploded on a scale that renders the fourth quarter a loser, but either way all related assets should be valued at scrap value."

On Monday, we received our answer from The Street's Chris Ciaccia: BlackBerry entered into a letter of intent to sell itself to Toronto-based Fairfax Financial Holdings for $9 a share.

Fairfax Financial reportedly owns about 10% of BlackBerry's shares currently and it makes sense it would be willing to pony up $9 for a stock that is likely worth a lot more. During the previous month's trading, and before announcing the end of non-pro consumer sales, BlackBerry traded at an average price above $10.

Had BlackBerry not announced the dropping of consumer sales and only reported its earnings results with the standard "We're about to enter fourth quarter and expect sales to recover" spin that every other CEO provides during a tough retail third quarter, it's hard to imagine BlackBerry shares trading under $9.

Even with the crazy "We're going to end retail sales right before the holiday rush" announcement, the shares closed Friday near $8.73 and stayed above $8 on Monday before jumping higher on the takeover bid.

This is a rotten deal for shareholders. If accepted, they are receiving little more than the scrap value for the company. Two years ago, I predicted BlackBerry would be bought out within a year, and so Monday's announcement isn't a surprise. But the way BlackBerry's CEO Thorsten Heins has thrown in the towel is disappointing.

One can hope Microsoft ( MSFT), Google ( GOOG), or even Yahoo! ( YHOO) steps up and does for BlackBerry's shareholders what Heins doesn't appear able to do on his own -- get a fair value for the company.

Maybe there's another reason why Heins isn't highly motivated to slug it out through another holiday season -- 55 million reasons to be exact. . It shouldn't come as a surprise, I wrote here and here that Heins was brought in for a quick sale, and his compensation was built to motivate him to find a buyer.

Not only did Heins take much longer than I expected, if the best he can get is $9 a share, then only top management are winners in the deal. BlackBerry may not know how to make a smartphone that sells, but it appears it still knows how to make golden parachutes.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Robert Weinstein is an active trader focusing on the psychological importance of risk mitigation, emotion and financial behavior of market participants. Robert co-founded the investing blog StockSaints, where he writes a journal about his trading activity and experiences.

In addition to TheStreet, Robert also contributes to Real Money Pro, providing real-time trading ideas for stocks, options and futures.

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