The BlackBerry melodrama may finally be coming to a close. Just days after announcing apocalyptic cuts in its workforce, the company revealed that its largest stakeholder, Fairfax Financial Holdings, has offered to buy the company out for $4.7 billion, or $9 a share.
The proposed deal comes in the nick of time. BlackBerry (BBRY), née Research In Motion, was left as the smartphone-hardware company still hanging around the party after everyone else had already paired off: Hewlett-Packard (HPQ) swept Palm away to a marriage that never quite worked out, Google (GOOG) took Motorola home, and Microsoft (MSFT) finally committed to Nokia (NOK) after leading it on through an extended “partnership” phase. Even Dell (DELL), a onetime smartphone player, will buy itself out and head home alone.
Monday’s news finally provided a ready answer to the long-running rhetorical question: Who would want to buy BlackBerry? The answer, however, likely spells the end of the road for BlackBerry as a smartphone maker. Of course, that may have been a foregone conclusion anyway. Fairfax, for its part, seems to have run the numbers and decided that there is still some value to be squeezed out of the company. This doesn’t seem illogical at first glance. BlackBerry has an arsenal of patents, which have been valued between $2 billion and $5 billion. It also has money sitting around: Between cash, short-term investments, and accounts and notes receivable, BlackBerry itself says it has $5.2 billion.
Hours before the deal was announced, Makor Financial said that BlackBerry actually had something going for it, pegging the patents at $2.5 billion and the real value of BlackBerry’s cash reserve at $2 billion. After the collapse in stock price last week, BlackBerry’s total market cap was $4.6 billion. “The business is currently valued at zero by the market. We think that this is way too aggressive, particularly in the context of the Microsoft/Nokia deal and the refocusing on the enterprise user,” Makor said in a research note.
Despite its immense troubles, BlackBerry still brings in revenue, too, with free cash flow last quarter of $547 million. But the Canadian company’s value as a real business is evaporating rapidly. In the second quarter of this year, sales were $1.6 billion, just over half of the $3 billion average estimate of analysts surveyed by Bloomberg. So Fairfax could run the business for a bit while planning how to salvage it for scrap, and that’s likely where this story ends.