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Reuters reported earlier that BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) is holding talks with Cisco Systems, Inc. (NASDAQ:CSCO), Google Inc (NASDAQ:GOOG) and SAP with regards to the sale. Further, there may be other strategic buyers like Intel Corporation (NASDAQ:INTC), LG and Samsung, which may express preliminary interest in the troubled phone maker later this week.
Jefferies analysts Peter Misek, Jason North and Billy Kim believe that strategic buyers will succeed at realizing greater value for BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB), but the Canadian firm has failed to “garner interest thus far.”
Vendors may bid for specific segment of BlackBerry
Apart from Google, SAP and Cisco, the Canada-based smartphone pioneer has called for Intel, and Asian big names like LG and Samsung, to present preliminary expression of interest this week. A significant point noted from the report is that the potential buyers are interested in the secure server network and patent portfolio.
Consumer handsets and the Operating System might be an attractive asset for Asian vendors like Lenovo or ZTE, which can offset commoditization pressure by acquiring an OS that is linked to Android apps and has a strong base in M2M. Other assets like patents, brand and distribution may also have value. However, analysts feel that value may decline when consumers are separated from the enterprise side, but this will also remove concerns of U.S. national security.
BlackBerry Messenger, on the other hand, may be attractive to social networking or messaging sites such as Yahoo! or Google. IT companies like Cisco, HPQ, IBM, and Oracle might be interested in MDM, BES, enterprise handsets, and global NOC/node network.
“Given the move to the cloud we believe enterprises will want secure network connectivity, data compression, and a global data center network.”
Fairfax and available options
Analysts at Jefferies note that Fairfax has raised $3 billion from bank loans, but still needs $1.2 billion to fund the $4.7 billion deal. Primarily, Fairfax was looking forward to getting support from other co-investors, but now it seems like there is hardly anyone interested in the whole company. Another Plan of Fairfax might be to secure a bridge loan for 6 months of $1.2 billion and pay it back through BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s own cash, once the deal is closed. Their last option would be lowering the bid from $9 to $7, which will potentially down the reputation of Prem Watsa and Fairfax financials.
In their analysis, analysts note that patents will value around $1 billion-$2.5 billion. The service business (MDM + legacy services) may hold the value around $2 billion-$3 billion. Analysts feel that patent value will increase if the handset business is wound down fast, but there will be contrary effect on the service segment.