Jim Armitage: Blackberry deal - lifeline is nothing more than ugly break-up

 

After two years of rapidly worsening misery, capped with one of the most sensational profit warnings in recent corporate history last week, Blackberry shareholders have been thrown a lifeline. Albeit one that’s frayed to a thread and covered in a noxious mould.

Stuck in a market of fast-forward Darwinian evolution, the implosion of their company has been one of the most extraordinary since, well… Nokia’s. But now, one shareholder, Fairfax, reckons it can reverse the survival of the fittest paradigm. Despite the vast muscle of Samsung, the design flair of Apple, the financial strength of the Huaweis and HTCs snapping up minority market shares, Fairfax thinks Blackberry can become a contender once more. The executive’s mobile of choice.

Huh? They must be living in some parallel universe, where the sickest thrive, the weak inherit the earth. For Blackberry is surely lurching, zombie-like, towards the mobile graveyard, hobbling there at an even quicker pace than Nokia. At least the Finns are selling 50 million handsets a month. About 3 million of Blackberry’s new Z10s are currently said to be gathering dust unsold as draught excluders.

Last week’s trading statement made it clear. As Enders analyst Benedict Evans points out, this is not a decent business that’s been hiding inside bad executive decisions (although buying a corporate jet in July was clearly not bright planning). Inside that death shroud of bad management, there is, in truth, no business left at all.

What Fairfax will have, however, is a bunch of patents with some value (Google valued Motorola’s at about $5.5bn), and the installed software in thousands of businesses who retain Blackberry for secure corporate email. Who knows – someone might pay good money for such a customer base.

Add that to a cash pile of a couple of billion dollars and you’re probably getting pretty near the $4.7bn Fairfax is offering.

In other words, this is most likely to end up being a break-up bid and nothing more. Others may come in with rival offers, but the price will be similar. Shareholders will grab this lifeline as the alternative is to drown altogether in the longer run.

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