BlackBerry's Sinking Ship

NEW YORK ( TheStreet) -- On Friday, shares of BlackBerry ( BBRY) plunged after the company announced that its earnings would be well below estimates and said it is slashing 40% of its workforce.

I have not been a big advocate of BlackBerry or its CEO Thorsten Heins and his less than stellar management.

And since I'm sure there are still a load of BlackBerry loyalists out there who will blast this article, I'll leave the I told you so's for another day. Instead, I'll simply warn any prospective buyers eyeing the stock: PLEASE AVOID.

The all-caps was necessary, trust me. The Z10 was supposed to be the game changer that the Canadian smartphone maker needed to break back into contention. Along with the Q10, the phones were about to turn the world upside down with how great they were.

But great to who? Sales severely underwhelmed expectations, as BlackBerry whiffed when it reported earnings in June.

One thing BlackBerry did have going for it, and still does to a point, is that it carries no debt. However, the $3 billion pile of cash it had last quarter has dwindled to $2.5 billion and will likely keep falling.

The company isn't selling phones to consumers anymore, even though it released several new devices in 2013. It has written off almost $1 billion worth of inventory, a telling sign of how sales are going.

Fairfax Financial, a Canadian insurance company, has announced that it will be BlackBerry's savior, except that stepping in to take the company private at $9 per share doesn't exactly warrant a celebration party.

A little while back I wrote an article about why investors should buy Apple ( AAPL) over BlackBerry, when they were both down roughly the same percentage year-to-date. I still think that is a good idea, especially in light of this recent takeover news.

I've been a BlackBerry bear, without question. However, even I could argue that the company is worth more than the paltry $9 per share offer. But I have to question: Who would be willing to buy BlackBerry who hasn't already stepped up to do so?

It's not like BlackBerry has been keeping it a secret that it's for sale

Even so, whether anyone thinks the company should fetch $10, $12 or something more doesn't matter. If no one steps up in the next six weeks, this company will go for $9.

Nine bucks.

This is a company that had an $80 billion market cap in 2008. A $9 deal would give it a $4.7 billion valuation. For a company that has more than $2 billion in cash, that's nothing.

But if that deal falls apart, the stock will quickly drift lower toward those cash levels.

To get long now makes little sense. The upside is limited, and likely will be only about $9, tops. If the deal does fall through, the stock will go lower in a hurry. With the stock fading from that $9-level as we speak, the market may be suggesting it doesn't fully believe that a deal will get done.

At the time of publication, the author was long Apple.

-- Written by Bret Kenwell in Petoskey, Mich.

Bret Kenwell currently writes, blogs and also contributes to Robert Weinstein's Weekly Options Newsletter. Focuses on short-to-intermediate-term trading opportunities that can be exposed via options. He prefers to use debit trades on momentum setups and credit trades on support/resistance setups. He also focuses on building long-term wealth by searching for consistent, quality dividend paying companies and long-term growth companies. He considers himself the surfer, not the wave, in relation to the market and himself. He has no allegiance to either the bull side or the bear side.

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