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Fairfax strikes $4.7-billion deal to buy BlackBerry

245 points by sbarre 13y ago

antr 13y ago
"Tentatively sold" is the worst description ever for what is really happening. BB has just received an offer, the board has now approved this, but needs to advise shareholders if this is a fair or not offer, dd is pending, and shareholders have to decide yes/nor by tendering their shares... add to that to the possibility of more offers being made, making this entire thing last months (a la Dell et al). Source: http://press.blackberry.com/press/2013/blackberry-enters-into-letter-of-intent-with-consortium-led-by-f.html http://press.blackberry.com/press/2013/blackberry-enters-int...
- 3am 13y ago
  It should be noted Fairfax holds 10% of BBRY shares (http://finance.yahoo.com/q/mh?s=BBRY http://finance.yahoo.com/q/mh?s=BBRY), which means this to be taken a little more seriously than a 3rd party unsolicited bid.
  - antr 13y ago
    I'm not saying otherwise, but a "letter of intent" has the same legality be it from an existing shareholder or a non-current shareholder.
    - JumpCrisscross 13y ago
      Hmm, they could be fishing to help value their existing stake.
      - chollida1 13y ago
        That's a big gamble. The stock went from 8.60 to 9.20 on this news. If this is a gamble and their bluff is called the stock is in for quite a tumble. This doesn't really fit the risk profile of FairFax capital.
lmg643 13y ago
very interesting move. i currently have both a blackberry for personal and work (yeah, one of those guys). i am converting the personal blackberry to an iphone, and the work to the q10. the iphone arrives tomorrow. i've been waiting a month for the q10. i still have high hopes for the q10 device but the only thing i get out of blackberry is the keyboard, and cloud synching of notes from the device on an enterprise account. i don't think it's enough.
runako 13y ago
In context: Apple likely made more than $4.7B in revenue from its weekend iPhone launch.
- bthomas 13y ago
  On the other hand, I'd rather have one Twitter than three BlackBerrys
- jamespo 13y ago
  "brought in" would be more appropriate than made but yes
  - runako 13y ago
    I think you're too quick to imply that I don't know the difference between "revenue" and "profit". :-) Note my phrasing: "made ... in revenue". The word "revenue" means what you're implying with "brought in", which is the top-line number. My apologies if I'm misinterpreting.
- chancancode 13y ago
  ...and Motorola was sold to Google at ~$12.5B[1] at 2011. [1] http://www.zdnet.com/blog/btl/googles-motorola-acquisition-nail-in-the-android-patent-coffin/54967 http://www.zdnet.com/blog/btl/googles-motorola-acquisition-n...
- dubcanada 13y ago
  If you do the math assuming Apple make's $400 a phone which may or may not be true, and the 9 million figure is correct. Then they made $3.6B however they probably made another 1B from accessories, warranties, apps, etc. So yah they probably did.
  - epa 13y ago
    Less all expenses to launch, design, develop, manufacture, ship the current phones, they are at a good pace of getting a return on their investment. Don't look at it too linearly.
lambersley 13y ago
Its a(nother) sad day in tech-Canada. You don't have to like their products to appreciate how they change the mobile landscape.
- apetresc 13y ago
  This deal is not a death knell for BlackBerry by any stretch. I'm from Waterloo and I can tell you that the general impression from the town and the people working there is very positive – they're free from the pressures of quarterly earnings calls to regroup. This sale is not the end of BlackBerry.
  - sami36 13y ago
    "I'm from Waterloo and I can tell you that the general impression from the town and the people working there is very positive" If your definition of positive is the same condition that afflicts the posters & commenters on Crackberry.com, I think a more appropriate word would be "delusional." They've been positive & upbeat all along during BBRY's spiraling death march. With all due respect, I've yet to read ONE story out of Canada about Blackberry that was not plagued by misplaced sentimentalism, or economic nationalism. Just a couple days ago, I was mesmerized to watch a very somber Peter Mansbridge interrogate his panel of journalists aboutwhat RIM's demise meant for Canadian identity....crazy stuff.
    - apetresc 13y ago
      I'm referring specifically to the University and startup scene around here. If anything, it's the opposite – they've been absolutely cynical the last few years. I don't think you'll find a higher concentration of "rim job" jokes anywhere than UWaterloo. Don't get me wrong, we are _rooting_ for them. A lot of us bought stock years ago and they're very generous with the city and University, but this is basically the first perceived "good news" about RIM in years.
    - twerquie 13y ago
      The Canadian press has been beating Blackberry up since the first round of delays leading up to the BB10 release. The Globe and Mail, CBC, National Post and The Star have all turned on them, and continue to be pessimistic while covering today's news. There is however some delusion among some Canadians that good vibes and loyal patronage can keep BB afloat.
lesbaker 13y ago
Hopefully this means that BlackBerry will survive in some form and have a future. Their recent phones and version 10 OS have a lot of merit, and I enjoy using and developing for them.
rocky1138 13y ago
OK, let's start guessing who Fairfax is :)
- chollida1 13y ago
  > OK, let's start guessing who Fairfax is :) Why do we need to guess who they are? They are a public company listed on teh TSX. Did we nee to guess who Google was when they put in an offer for Motorola?
  - samspenc 13y ago
    Not sure of the OP's point, but when I saw Fairfax, first thing I thought of was Fairfax County: http://en.wikipedia.org/wiki/Fairfax,_Virginia http://en.wikipedia.org/wiki/Fairfax,_Virginia
  - rocky1138 13y ago
    Sorry, I meant who is Fairfax representing? "Fairfax Financial Holdings Ltd. has put together an equity consortium..." "Fairfax’s equity partners want to remain anonymous until the due diligence is completed."
- MikeCapone 13y ago
  Well-known Canadian conglomerate, mostly doing insurance and reinsurance, but with some other operational buisnesses. Headed by Prem Watsa, often called the "Warren Buffett of Canada". http://www.fairfax.ca/ http://www.fairfax.ca/
- aren55555 13y ago
  http://crackberry.com/could-we-see-return-mike-lazaridis-if-blackberry-goes-private http://crackberry.com/could-we-see-return-mike-lazaridis-if-...
cs702 13y ago
Fairfax Financial is run by Prem Watsa, a cautious, methodical, "value" investor who has compounded Fairfax's book value by nearly 23%/year over the past 27 years.[1] (Fairfax's stock price has gained 19%/year over the same three-decade period.) His approach and track record are similar to those of Warren Buffett earlier in his career -- i.e., not someone one should normally bet against. If Fairfax is offering to pay $4.7 billion to acquire RIM, Mr. Watsa somehow must have convinced himself that the value of RIM's business exceeds $4.7 billion by a large margin. However, to me Blackberry looks like a dying platform suffering from anti-network effects (that is, fewer and fewer people use it, so fewer and fewer people want or need to use it). I don't understand how he gets comfortable with that number. -- [1] See page 8 of Fairfax's last annual letter to shareholders: http://www.fairfax.ca/files/Letter%20to%20Shareholders%20from%20Annual%20Report%202012%20FINAL_v001_o7033s.pdf http://www.fairfax.ca/files/Letter%20to%20Shareholders%20fro...
- JonFish85 13y ago
  Take it private, do another, more aggressive round of layoffs and get down to a very core group. Then decide whether to chop it up and sell it off (patents alone are probably worth a good chunk of money). As far as I know, Blackberry has no debt, so that makes the math a bit easier.
  - deleted 13y ago
    [deleted]
  - beat 13y ago
    As I put it elsewhere, there's not $4.7B of meat on the corpse. And that seems against the grain of a growth-oriented fund. That's the sort of thing that old-school junk bond funds would do to buy up and part out factories, inventory, and pension funds. The only justifications I can think of for buying Blackberry are a: to rebuild them, b: to integrate their good tech into an existing system (a good play for an also-ran smart phone that wants more market share and is willing to gamble for Blackberry's old, loyal enterprise market), c: to deliberately put them out of business (a good play for a successful smart phone to either go after the vacuum created by their death, or prevent competitors from exercising plan B).
mindstab 13y ago
sooo... it seems partly for emotional reasons “We’re trying to make sure it remains in whole in Canada" that is not a business reason "we have every confidence it will be successful again,” based on? "There are no strategic players, or other technology firms, in the consortium." so... a bunch of non technical players want to try and save a dying tech company for emotional reasons? unless I'm missing something it might seem like a good idea to run away from that deal and fairfax at a pretty good speed. i mean blackbeerry just announced hilarious losses for q2, dropped 4500 staff and just announced "pulling out of the consumer market to focus on enterprise"... it seems they are deeply failing to learn from the lessons of the iphone 7 years ago now. they always were a more enterprise phone and that was still not enough to save them from being cannibalized first from iphone and now android. hell even now windows phones makes better sense because it will tie in with your windows outlook, etc infrastructure better in your standard microsoft office. am I missing something? thoughts?
- canistr 13y ago
  All they're really saying is that they want to maintain control without outsiders. And to really do that, they have to convert the company back into a private one, cut their losses by removing the deadweight in the 4500 employees, then stick to a core business that they know will keep them alive.
  - Mikeb85 13y ago
    They should do infrastructure, and high-end Android phones aimed squarely at execs. Qnx is great, but the eco-system is in Android, BlackBerry should make the switch. Their hardware is great, they could bring their UI and apps with them, enter Google's ecosystem and sell a bunch of gold-plated, physical keyboard equipped Android phones...
    - nly 13y ago
      I think switching to Android would be a disaster. "Just another Android phone" is something we see already in the market, with very few players actually differentiating themselves.
canistr 13y ago
Let's be clear, Fairfax 'buying' BlackBerry given Prem Watsa was on BB's board is akin to saying Dell was 'sold' to Michael Dell.
runarb 13y ago
The bid is US$9 per share, but it traded at $10.50 around the announcement?[0] Are they really going to get away with paying below last marked price... 0: https://www.google.com/finance?q=BlackBerry&ei=64NAUpDFA8OXwQPsVQ https://www.google.com/finance?q=BlackBerry&ei=64NAUpDFA8OXw...
- deleted 13y ago
  [deleted]
- chollida1 13y ago
  Well the announcement you are referring to is the layoffs and quarterly losses and not the letter of intent. This news solidified what the street thought about Blackberry's recent BB10 sales. Its sort of like saying this house was worth 1 million before the fire. How can someone get away with paying on 300,000 for it now that its been burned to the ground. The answer is that given the new news( poor sales, layoffs, write downs of inventory, etc) that BB is no longer worth 10.50/share. So to answer you question, yes they probably will get that price.
- jonknee 13y ago
  It was selling for $8.26 this morning--the drop you're seeing is from last week after they announced they lost $1,000,000 over the previous 90 days and were laying off 4,500 people. The buyout announcement is what provided the small boost this afternoon.
mililani 13y ago
Ugh. I know Fairfax VERY well. Prem Watsa is often called Warren Buffett of the North, and he may very well be. He's a great investor, and has done VERY well in investing the float of their insurance business. But, BUT, I think he's way in over his head here. Buffett himself will not touch technology companies, or businesses he doesn't understand. He has also said the technology world is way too competitive, and that there is hardly a "moat" that can protect a business from competition, etc... I don't understand why Prem is going after Blackberry. It is clearly in one of the most competitive spaces in technology, and there is no good crystal ball to see what the future holds. I mean, for every Apple, there are lots of companies like US Robotics. It is why I shy away from technology companies with my investments.
- mhartl 13y ago
  To be fair, Watsa is a current RIM investor and a former board member. That suggests he probably has a good idea of what he's getting into.
  - josefresco 13y ago
    OR.... he's biased into thinking RIM can "pull through" because of his existing close relationship with the company.
- Mikeb85 13y ago
  And yet Warren Buffett has invested in BYD (Chinese electric car and battery company) and done very well... Edit - I've also done well trading BYD :-)
  - GFischer 13y ago
    It's not only electric cars, they sell a full line of gas-powered vehicles, which sell a lot here in Latin America. Several people I know own a BYD car, and are reasonably happy. See their local pages: http://www.bydauto.cl http://www.bydauto.cl (Chilean page) http://www.byd.com.uy http://www.byd.com.uy (Uruguayan page)
JumpCrisscross 13y ago
Fairfax Financial Holdings (TSX: FFH) is an $8.3 billion property and casualty insurance company. They are an acquisitive bunch, having spent $4.7 billion on deals since 2011 (37% of their enterprise value as of 30 June 2013 or 57% of their market capitalisation as of today). All their acquisitions since 1997 have been in the banking, insurance or shipping/transportation spaces, with the exceptions of EFI Global (environmental services). Their CEO, Prem Watsa, is a value investor. Fairfax's IRR is around 20% - this means Blackberry needs to yield about $840 million in cash a year to tread water. That seems unlikely. Instead, I think we will see a spin-off of the handset business and patent portfolio with a retention of the cash-flow generating service business. What's the service business worth? It made $3.2 billion annualised the last quarter (Q2 FY 2014), $3.9 billion in FY 2013, and $4.1 billion in FY 2012. Let's assume it keeps declining at 8% a year. Let's further assume it can return at least the entire company's FY 2013 40% gross margin. Guess what 40% of $2.9 billion declining at 8% annually and discounted at 20% is worth over the next 10 years? $4.7 billion. Thus, if decline can be maintained at no more than 8% while margins are maintained at 40% and the cost of capital capped at 20%, the handset business, patent portfolio, and any terminal value after 2023 are freebies.
xux 13y ago
Just wondering, why would an Insurance company buy BlackBerry? What are they planning to do with it?
- bgilroy26 13y ago
  I started working at an insurance company (my second real job) 6 mos ago. Insurance companies are banks but instead of getting money to invest from depositors, it comes from businesses and individuals who hold policies. A population of policy holders is predictable most of the time. You take the money that you know you won't have to pay out and you invest it. Warren Buffet's money comes from Geico etc. That's why they advertise so much. The operations of Geico do not return fast enough to justify that marketing spend. Warren Buffet's portfolio of businesses, on the other hand, return handsomely. A good sized fraction of the money of the people who see all those commercials gets funneled directly into GEICO's float and increases Buffet's leverage.
xbeta 13y ago
On a side story of the same article, I saw this : BlackBerry bought private jet months before layoffs http://www.cnbc.com/id/101053908 http://www.cnbc.com/id/101053908
- curiousDog 13y ago
  From the article: "In light of the company's current business condition, the company has decided to sell that aircraft along with the two legacy aircraft and will no longer own any planes." They probably bought it before this slump. Jets take months to deliver.
yalogin 13y ago
I really hope this is not a front for a patent troll. I know 4.7B is a lot for a patent troll to spend but the most valuable assets BB holds right now are its patents. A tech player is not going to (rather should not) buy BB because a negative momentum is much more dangerous than a non-existent one.
- 3am 13y ago
  Google Fairfax and Prem Watsa. He is sort of like Canada's Warren Buffett and a large existing BBRY shareholder. Not saying he won't monetize their IP portfolio, but it's not a front for a patent troll.
mpg33 13y ago
Irregardless of this deal...I'm still skeptical of where BlackBerry goes from here. They said they are out of the consumer handset market yet the consumer handsets were what gave BlackBerry those huge revenues/profits. The corporate-only strategy I read about seems like if even successful would be much smaller in scope. There seems to be no real idea of what BlackBerry has to offer anymore??
GavinAnderegg 13y ago
I hope this works out well for everyone involved. I also hope that Fairfax leaves Blackberry alone if the deal goes through. I say this judging ONLY by the state of Fairfax's website: http://www.fairfax.ca/ http://www.fairfax.ca/
steveplace 13y ago
Back in 2012 I figured that the total value of cash + patents got us a share price of around 8 bucks, so I guess that seems about right. http://investingwithoptions.com/blog/2012/05/03/rimm-shake-shorts-patent-portfolio/ http://investingwithoptions.com/blog/2012/05/03/rimm-shake-s...
rdl 13y ago
I hope this doesn't cause them to patent-troll with the Certicom ECC patents.
chollida1 13y ago
I worked at another Canadian company called Corel back in 2002 that went through a similar takeover. Company with a large cash position relative to the take over price, taken private by a Fund with the intention of being taken public again in a few years after costs were under control. If that experience was any indication of whats to come then life at BBRY is about to become atlot less fun. When a fund comes in they have a window for which they want to see a return( ie go public again or sell). In such cases any expense that can't be directly traced to adding to the bottom line will be mercilessly cut. Good by Friday afternoon beers, employee sports teams, Christmas parties, bonuses, T-Shirts, etc. The MO for takeovers like this is similar to a house flipper, they aren't looking to do the right thing for the long term, they'd rather do what can be done to make things look good for the next 2-3 years. They understand( or believe) that employees will stick around in the short term( and put up with this stuff) if they believe an IPO is only a few years away. As someone who sits on the other side of the table now at a fund, I've seen it happen from both sides now.
- jonknee 13y ago
  > Good by Friday afternoon beers, employee sports teams, Christmas parties, bonuses, T-Shirts, etc. Considering they lost $1,000,000 in the last 90 days I would assume it hasn't been a very fun place to work at in a while. Maybe you could ask one of the 4,500 people they just laid off?
  - molecule 13y ago
    > Considering they lost $1,000,000 in the last 90 days... $1,000,000,000
    - jonknee 13y ago
      Whoops. I knew it was a lot of zeros... $11,111,111 a day. Or $462,962 an hour or $128 a second. That's a lot of cash.
Pxtl 13y ago
Crap. I was hoping for an investor that actually had some kind of real plan, some technical synergy they could offer... Facebook or Sony or Canonical or something.
bond 13y ago
Time to put Android on those phones...
denzil_correa 13y ago
The deal is not done as yet - there are "terms" to be discussed as well as 6 weeks of time. It only has a letter of intent from Fairfax in which shareholders would receive $9 per share in cash.
gremlinsinc 13y ago
why not use their resources to help build the new Ubuntu Mobile phone that was on kick starter it would be a huge in demand project with a lot of buzz...Ubuntu knows software blackberry hardware could be An interesting marriage.
- n2dasun 13y ago
  Similarly, a phone with a Blackberry-designed physical keyboard and [a maintained] WebOS on it would keep me from ever choosing a new smartphone again. I'd just keep buying the same phone over and over again, personally.

245 points by sbarre 13y ago

antr 13y ago

"Tentatively sold" is the worst description ever for what is really happening. BB has just received an offer, the board has now approved this, but needs to advise shareholders if this is a fair or not offer, dd is pending, and shareholders have to decide yes/nor by tendering their shares... add to that to the possibility of more offers being made, making this entire thing last months (a la Dell et al). Source: http://press.blackberry.com/press/2013/blackberry-enters-into-letter-of-intent-with-consortium-led-by-f.html http://press.blackberry.com/press/2013/blackberry-enters-int...

3am 13y ago
It should be noted Fairfax holds 10% of BBRY shares (http://finance.yahoo.com/q/mh?s=BBRY http://finance.yahoo.com/q/mh?s=BBRY), which means this to be taken a little more seriously than a 3rd party unsolicited bid.
- antr 13y ago
  I'm not saying otherwise, but a "letter of intent" has the same legality be it from an existing shareholder or a non-current shareholder.
  - JumpCrisscross 13y ago
    Hmm, they could be fishing to help value their existing stake.
    - chollida1 13y ago
      That's a big gamble. The stock went from 8.60 to 9.20 on this news. If this is a gamble and their bluff is called the stock is in for quite a tumble. This doesn't really fit the risk profile of FairFax capital.

lmg643 13y ago

very interesting move. i currently have both a blackberry for personal and work (yeah, one of those guys). i am converting the personal blackberry to an iphone, and the work to the q10. the iphone arrives tomorrow. i've been waiting a month for the q10. i still have high hopes for the q10 device but the only thing i get out of blackberry is the keyboard, and cloud synching of notes from the device on an enterprise account. i don't think it's enough.

runako 13y ago

In context: Apple likely made more than $4.7B in revenue from its weekend iPhone launch.

bthomas 13y ago
On the other hand, I'd rather have one Twitter than three BlackBerrys
jamespo 13y ago
"brought in" would be more appropriate than made but yes
- runako 13y ago
  I think you're too quick to imply that I don't know the difference between "revenue" and "profit". :-) Note my phrasing: "made ... in revenue". The word "revenue" means what you're implying with "brought in", which is the top-line number. My apologies if I'm misinterpreting.
chancancode 13y ago
...and Motorola was sold to Google at ~$12.5B[1] at 2011. [1] http://www.zdnet.com/blog/btl/googles-motorola-acquisition-nail-in-the-android-patent-coffin/54967 http://www.zdnet.com/blog/btl/googles-motorola-acquisition-n...
dubcanada 13y ago
If you do the math assuming Apple make's $400 a phone which may or may not be true, and the 9 million figure is correct. Then they made $3.6B however they probably made another 1B from accessories, warranties, apps, etc. So yah they probably did.
- epa 13y ago
  Less all expenses to launch, design, develop, manufacture, ship the current phones, they are at a good pace of getting a return on their investment. Don't look at it too linearly.

lambersley 13y ago

Its a(nother) sad day in tech-Canada. You don't have to like their products to appreciate how they change the mobile landscape.

apetresc 13y ago
This deal is not a death knell for BlackBerry by any stretch. I'm from Waterloo and I can tell you that the general impression from the town and the people working there is very positive – they're free from the pressures of quarterly earnings calls to regroup. This sale is not the end of BlackBerry.
- sami36 13y ago
  "I'm from Waterloo and I can tell you that the general impression from the town and the people working there is very positive" If your definition of positive is the same condition that afflicts the posters & commenters on Crackberry.com, I think a more appropriate word would be "delusional." They've been positive & upbeat all along during BBRY's spiraling death march. With all due respect, I've yet to read ONE story out of Canada about Blackberry that was not plagued by misplaced sentimentalism, or economic nationalism. Just a couple days ago, I was mesmerized to watch a very somber Peter Mansbridge interrogate his panel of journalists aboutwhat RIM's demise meant for Canadian identity....crazy stuff.
  - apetresc 13y ago
    I'm referring specifically to the University and startup scene around here. If anything, it's the opposite – they've been absolutely cynical the last few years. I don't think you'll find a higher concentration of "rim job" jokes anywhere than UWaterloo. Don't get me wrong, we are _rooting_ for them. A lot of us bought stock years ago and they're very generous with the city and University, but this is basically the first perceived "good news" about RIM in years.
  - twerquie 13y ago
    The Canadian press has been beating Blackberry up since the first round of delays leading up to the BB10 release. The Globe and Mail, CBC, National Post and The Star have all turned on them, and continue to be pessimistic while covering today's news. There is however some delusion among some Canadians that good vibes and loyal patronage can keep BB afloat.

lesbaker 13y ago

Hopefully this means that BlackBerry will survive in some form and have a future. Their recent phones and version 10 OS have a lot of merit, and I enjoy using and developing for them.

rocky1138 13y ago

OK, let's start guessing who Fairfax is :)

chollida1 13y ago
> OK, let's start guessing who Fairfax is :) Why do we need to guess who they are? They are a public company listed on teh TSX. Did we nee to guess who Google was when they put in an offer for Motorola?
- samspenc 13y ago
  Not sure of the OP's point, but when I saw Fairfax, first thing I thought of was Fairfax County: http://en.wikipedia.org/wiki/Fairfax,_Virginia http://en.wikipedia.org/wiki/Fairfax,_Virginia
- rocky1138 13y ago
  Sorry, I meant who is Fairfax representing? "Fairfax Financial Holdings Ltd. has put together an equity consortium..." "Fairfax’s equity partners want to remain anonymous until the due diligence is completed."
MikeCapone 13y ago
Well-known Canadian conglomerate, mostly doing insurance and reinsurance, but with some other operational buisnesses. Headed by Prem Watsa, often called the "Warren Buffett of Canada". http://www.fairfax.ca/ http://www.fairfax.ca/
aren55555 13y ago
http://crackberry.com/could-we-see-return-mike-lazaridis-if-blackberry-goes-private http://crackberry.com/could-we-see-return-mike-lazaridis-if-...

cs702 13y ago

Fairfax Financial is run by Prem Watsa, a cautious, methodical, "value" investor who has compounded Fairfax's book value by nearly 23%/year over the past 27 years.[1] (Fairfax's stock price has gained 19%/year over the same three-decade period.) His approach and track record are similar to those of Warren Buffett earlier in his career -- i.e., not someone one should normally bet against. If Fairfax is offering to pay $4.7 billion to acquire RIM, Mr. Watsa somehow must have convinced himself that the value of RIM's business exceeds $4.7 billion by a large margin. However, to me Blackberry looks like a dying platform suffering from anti-network effects (that is, fewer and fewer people use it, so fewer and fewer people want or need to use it). I don't understand how he gets comfortable with that number. -- [1] See page 8 of Fairfax's last annual letter to shareholders: http://www.fairfax.ca/files/Letter%20to%20Shareholders%20from%20Annual%20Report%202012%20FINAL_v001_o7033s.pdf http://www.fairfax.ca/files/Letter%20to%20Shareholders%20fro...

JonFish85 13y ago
Take it private, do another, more aggressive round of layoffs and get down to a very core group. Then decide whether to chop it up and sell it off (patents alone are probably worth a good chunk of money). As far as I know, Blackberry has no debt, so that makes the math a bit easier.
- deleted 13y ago
  [deleted]
- beat 13y ago
  As I put it elsewhere, there's not $4.7B of meat on the corpse. And that seems against the grain of a growth-oriented fund. That's the sort of thing that old-school junk bond funds would do to buy up and part out factories, inventory, and pension funds. The only justifications I can think of for buying Blackberry are a: to rebuild them, b: to integrate their good tech into an existing system (a good play for an also-ran smart phone that wants more market share and is willing to gamble for Blackberry's old, loyal enterprise market), c: to deliberately put them out of business (a good play for a successful smart phone to either go after the vacuum created by their death, or prevent competitors from exercising plan B).

mindstab 13y ago

sooo... it seems partly for emotional reasons “We’re trying to make sure it remains in whole in Canada" that is not a business reason "we have every confidence it will be successful again,” based on? "There are no strategic players, or other technology firms, in the consortium." so... a bunch of non technical players want to try and save a dying tech company for emotional reasons? unless I'm missing something it might seem like a good idea to run away from that deal and fairfax at a pretty good speed. i mean blackbeerry just announced hilarious losses for q2, dropped 4500 staff and just announced "pulling out of the consumer market to focus on enterprise"... it seems they are deeply failing to learn from the lessons of the iphone 7 years ago now. they always were a more enterprise phone and that was still not enough to save them from being cannibalized first from iphone and now android. hell even now windows phones makes better sense because it will tie in with your windows outlook, etc infrastructure better in your standard microsoft office. am I missing something? thoughts?

canistr 13y ago
All they're really saying is that they want to maintain control without outsiders. And to really do that, they have to convert the company back into a private one, cut their losses by removing the deadweight in the 4500 employees, then stick to a core business that they know will keep them alive.
- Mikeb85 13y ago
  They should do infrastructure, and high-end Android phones aimed squarely at execs. Qnx is great, but the eco-system is in Android, BlackBerry should make the switch. Their hardware is great, they could bring their UI and apps with them, enter Google's ecosystem and sell a bunch of gold-plated, physical keyboard equipped Android phones...
  - nly 13y ago
    I think switching to Android would be a disaster. "Just another Android phone" is something we see already in the market, with very few players actually differentiating themselves.

canistr 13y ago

Let's be clear, Fairfax 'buying' BlackBerry given Prem Watsa was on BB's board is akin to saying Dell was 'sold' to Michael Dell.

runarb 13y ago

The bid is US$9 per share, but it traded at $10.50 around the announcement?[0] Are they really going to get away with paying below last marked price... 0: https://www.google.com/finance?q=BlackBerry&ei=64NAUpDFA8OXwQPsVQ https://www.google.com/finance?q=BlackBerry&ei=64NAUpDFA8OXw...

deleted 13y ago
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chollida1 13y ago
Well the announcement you are referring to is the layoffs and quarterly losses and not the letter of intent. This news solidified what the street thought about Blackberry's recent BB10 sales. Its sort of like saying this house was worth 1 million before the fire. How can someone get away with paying on 300,000 for it now that its been burned to the ground. The answer is that given the new news( poor sales, layoffs, write downs of inventory, etc) that BB is no longer worth 10.50/share. So to answer you question, yes they probably will get that price.
jonknee 13y ago
It was selling for $8.26 this morning--the drop you're seeing is from last week after they announced they lost $1,000,000 over the previous 90 days and were laying off 4,500 people. The buyout announcement is what provided the small boost this afternoon.

mililani 13y ago

Ugh. I know Fairfax VERY well. Prem Watsa is often called Warren Buffett of the North, and he may very well be. He's a great investor, and has done VERY well in investing the float of their insurance business. But, BUT, I think he's way in over his head here. Buffett himself will not touch technology companies, or businesses he doesn't understand. He has also said the technology world is way too competitive, and that there is hardly a "moat" that can protect a business from competition, etc... I don't understand why Prem is going after Blackberry. It is clearly in one of the most competitive spaces in technology, and there is no good crystal ball to see what the future holds. I mean, for every Apple, there are lots of companies like US Robotics. It is why I shy away from technology companies with my investments.

mhartl 13y ago
To be fair, Watsa is a current RIM investor and a former board member. That suggests he probably has a good idea of what he's getting into.
- josefresco 13y ago
  OR.... he's biased into thinking RIM can "pull through" because of his existing close relationship with the company.
Mikeb85 13y ago
And yet Warren Buffett has invested in BYD (Chinese electric car and battery company) and done very well... Edit - I've also done well trading BYD :-)
- GFischer 13y ago
  It's not only electric cars, they sell a full line of gas-powered vehicles, which sell a lot here in Latin America. Several people I know own a BYD car, and are reasonably happy. See their local pages: http://www.bydauto.cl http://www.bydauto.cl (Chilean page) http://www.byd.com.uy http://www.byd.com.uy (Uruguayan page)

JumpCrisscross 13y ago

Fairfax Financial Holdings (TSX: FFH) is an $8.3 billion property and casualty insurance company. They are an acquisitive bunch, having spent $4.7 billion on deals since 2011 (37% of their enterprise value as of 30 June 2013 or 57% of their market capitalisation as of today). All their acquisitions since 1997 have been in the banking, insurance or shipping/transportation spaces, with the exceptions of EFI Global (environmental services). Their CEO, Prem Watsa, is a value investor. Fairfax's IRR is around 20% - this means Blackberry needs to yield about $840 million in cash a year to tread water. That seems unlikely. Instead, I think we will see a spin-off of the handset business and patent portfolio with a retention of the cash-flow generating service business. What's the service business worth? It made $3.2 billion annualised the last quarter (Q2 FY 2014), $3.9 billion in FY 2013, and $4.1 billion in FY 2012. Let's assume it keeps declining at 8% a year. Let's further assume it can return at least the entire company's FY 2013 40% gross margin. Guess what 40% of $2.9 billion declining at 8% annually and discounted at 20% is worth over the next 10 years? $4.7 billion. Thus, if decline can be maintained at no more than 8% while margins are maintained at 40% and the cost of capital capped at 20%, the handset business, patent portfolio, and any terminal value after 2023 are freebies.

xux 13y ago

Just wondering, why would an Insurance company buy BlackBerry? What are they planning to do with it?

bgilroy26 13y ago
I started working at an insurance company (my second real job) 6 mos ago. Insurance companies are banks but instead of getting money to invest from depositors, it comes from businesses and individuals who hold policies. A population of policy holders is predictable most of the time. You take the money that you know you won't have to pay out and you invest it. Warren Buffet's money comes from Geico etc. That's why they advertise so much. The operations of Geico do not return fast enough to justify that marketing spend. Warren Buffet's portfolio of businesses, on the other hand, return handsomely. A good sized fraction of the money of the people who see all those commercials gets funneled directly into GEICO's float and increases Buffet's leverage.

xbeta 13y ago

On a side story of the same article, I saw this : BlackBerry bought private jet months before layoffs http://www.cnbc.com/id/101053908 http://www.cnbc.com/id/101053908

curiousDog 13y ago
From the article: "In light of the company's current business condition, the company has decided to sell that aircraft along with the two legacy aircraft and will no longer own any planes." They probably bought it before this slump. Jets take months to deliver.

yalogin 13y ago

I really hope this is not a front for a patent troll. I know 4.7B is a lot for a patent troll to spend but the most valuable assets BB holds right now are its patents. A tech player is not going to (rather should not) buy BB because a negative momentum is much more dangerous than a non-existent one.

3am 13y ago
Google Fairfax and Prem Watsa. He is sort of like Canada's Warren Buffett and a large existing BBRY shareholder. Not saying he won't monetize their IP portfolio, but it's not a front for a patent troll.

mpg33 13y ago

Irregardless of this deal...I'm still skeptical of where BlackBerry goes from here. They said they are out of the consumer handset market yet the consumer handsets were what gave BlackBerry those huge revenues/profits. The corporate-only strategy I read about seems like if even successful would be much smaller in scope. There seems to be no real idea of what BlackBerry has to offer anymore??

GavinAnderegg 13y ago

I hope this works out well for everyone involved. I also hope that Fairfax leaves Blackberry alone if the deal goes through. I say this judging ONLY by the state of Fairfax's website: http://www.fairfax.ca/ http://www.fairfax.ca/

steveplace 13y ago

Back in 2012 I figured that the total value of cash + patents got us a share price of around 8 bucks, so I guess that seems about right. http://investingwithoptions.com/blog/2012/05/03/rimm-shake-shorts-patent-portfolio/ http://investingwithoptions.com/blog/2012/05/03/rimm-shake-s...

rdl 13y ago

I hope this doesn't cause them to patent-troll with the Certicom ECC patents.

chollida1 13y ago

I worked at another Canadian company called Corel back in 2002 that went through a similar takeover. Company with a large cash position relative to the take over price, taken private by a Fund with the intention of being taken public again in a few years after costs were under control. If that experience was any indication of whats to come then life at BBRY is about to become atlot less fun. When a fund comes in they have a window for which they want to see a return( ie go public again or sell). In such cases any expense that can't be directly traced to adding to the bottom line will be mercilessly cut. Good by Friday afternoon beers, employee sports teams, Christmas parties, bonuses, T-Shirts, etc. The MO for takeovers like this is similar to a house flipper, they aren't looking to do the right thing for the long term, they'd rather do what can be done to make things look good for the next 2-3 years. They understand( or believe) that employees will stick around in the short term( and put up with this stuff) if they believe an IPO is only a few years away. As someone who sits on the other side of the table now at a fund, I've seen it happen from both sides now.

jonknee 13y ago
> Good by Friday afternoon beers, employee sports teams, Christmas parties, bonuses, T-Shirts, etc. Considering they lost $1,000,000 in the last 90 days I would assume it hasn't been a very fun place to work at in a while. Maybe you could ask one of the 4,500 people they just laid off?
- molecule 13y ago
  > Considering they lost $1,000,000 in the last 90 days... $1,000,000,000
  - jonknee 13y ago
    Whoops. I knew it was a lot of zeros... $11,111,111 a day. Or $462,962 an hour or $128 a second. That's a lot of cash.

Pxtl 13y ago

Crap. I was hoping for an investor that actually had some kind of real plan, some technical synergy they could offer... Facebook or Sony or Canonical or something.

bond 13y ago

Time to put Android on those phones...

denzil_correa 13y ago

The deal is not done as yet - there are "terms" to be discussed as well as 6 weeks of time. It only has a letter of intent from Fairfax in which shareholders would receive $9 per share in cash.

gremlinsinc 13y ago

why not use their resources to help build the new Ubuntu Mobile phone that was on kick starter it would be a huge in demand project with a lot of buzz...Ubuntu knows software blackberry hardware could be An interesting marriage.

n2dasun 13y ago
Similarly, a phone with a Blackberry-designed physical keyboard and [a maintained] WebOS on it would keep me from ever choosing a new smartphone again. I'd just keep buying the same phone over and over again, personally.