streams (even if they are at risk) could appeal to a PE buyer.
BlackBerry Finally Looking For A Bidder, But Will A Real Buyer Bite?
August 14, 2013 | Filed Under » Communication Equipment, Equity, Earnings Recap
Tickers in this Article » BBRY, AMZN, MSFT, GOOG
It looks like an outbreak of rationality has hit BlackBerry (Nasdaq:BBRY), as the company announced on Monday that it had formed a special committee to “explore strategic alternatives” for the struggling handset company. While the company's announcement mentioned options like joint ventures, partnerships, and alliances, shareholders, analysts, and investors are are zeroing in almost exclusively on the possibility of a sale.
If BlackBerry is serious about a sale, it'll happen. I have no doubt that, at the right price, the company can find a buyer willing to take on the not-inconsiderable task of turning around this struggling high-end handset company. The trick is going to be that “at the right price” part. BlackBerry's enterprise value (that is, market capitalization net of cash and debt on the balance sheet) isn't very large, but any buyer is looking at a likely multi-year restructuring/turnaround program that will require capital, compress margins, and offer only uncertain payoffs.
SEE: Why Public Companies Go Private
Forget “Why Now?”, Why Not Sooner?
There isn't an especially glorious history of growth-by-acquisition in the mobile space, as ventures like Sony Ericsson haven't really accomplished all that much. Still, I have to wonder why BlackBerry waited so long to openly consider a sale of the company, as Amazon (Nasdaq:AMZN) was reportedly interested back in 2011 – a time when not only was the Blackberry share price 4x higher, but the business as in considerably better shape.
Now the acquisition of the company looks hardly better than buying a second-hand goldfish. Although revenue was up in the most recent quarter, unit sales were down 13%, the BB10 appears to be on a disappointing launch trajectory and the news about subs has gotten bad enough that the company no longer wants to talk about it with investors.
Making matters worse, what BlackBerry does best (high-end handsets) is looking increasingly less valuable as investors and analysts begin to openly debate the risks that the high-end handset market has peaked. With BlackBerry already out of the top 5 and the company offering a weak apps ecosystem compared to Apple (Nasdaq:AAPL) and Google's (Nasdaq:GOOG) Android, a willingness to sell may have come too late for shareholders to get anything close to top dollar.
Lining Up The Suitors
With earnings season over, you can bet that there will be no shortage of rumors and sell-side reports trying to handicap the potential bidders for BlackBerry. To start with, private equity could very likely play a role – more than one Canada-based investor has declared a willingness or interest to participate, and the company's cash flow streams (even if they are at risk) could appeal to a PE buyer.