BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) is scheduled to report its third quarter earnings on Friday, December 20. The company is going through a challenging phase as a number top executives are leaving the Canadian company. BBM, which was the primary source of BB7 income, is now available on Android and iOS devices. BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) continues to lose corporate customers at a rapid pace.

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BlackBerry’s deteriorating cash position

Bernstein Research analyst Pierre Ferragu said in a research note to investors that he expects the company to burn $800 million cash in Q3 alone, and at least $1.6 billion over the next six quarters. At the end of the second quarter, BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) had $2.6 billion in cash. And the company has received another $1 billion in convertible debentures from a consortium of investors led by Fairfax Financial.

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Its corporate clients are limiting their exposure to BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) or working on an “after-BlackBerry” plan. The consumer market scenario isn’t good either. Now that BBM is available on almost every smartphone, sales of BB10 devices are likely to go down, says Ferragu. Inventory build-up may force the company into another big write-off. BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) has already written off $934 million on Z10 inventory.

BlackBerry’s valuation

However, BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) investors have some good news. Bernstein analysts found in a sum-of-the-parts analysis that BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) could actually be worth between $6 billion – $13 billion, much higher than its current market value of about $3.25 billion. Let’s look at each asset of BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) and how Bernstein reached this valuation.


  • BBM

Pierre Ferragu estimates BBM’s value between $500 million and $5.5 billion. This valuation is based on comparable transactions, type of features and the potential for the user base growth. Comparing BBM with the value of its competitors, BBM has a price per user between $4 and $100. Bernstein thinks BBM could attract healthy bids in today’s market. We are going through a messaging bubble phase. Recently, Snapchat rejected a $3 billion offer from Facebook Inc (NASDAQ:FB). Potential buyers may find BBM a brilliant quick start to their messaging strategy. Google Inc (NASDAQ:GOOG) may acquire it to attach BBM with Motorola. Other potential buyers include Microsoft Corporation (NASDAQ:MSFT) Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) and Facebook Inc (NASDAQ:FB).



  • BlackBerry’s Land and Buildings

According to BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s annual report, its property, plant and equipment have a book value of $5 billion. Of that, about $1.4 billion is the value of buildings and land that are spread over 4 million square feet. Market value of BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s land and buildings is estimated between $1.2 billion and $1.6 billion.



  • Infrastructure

BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s infrastructure assets include its data centers and fully-secured IP connections with more than 650 telecom carriers and resellers globally. But there is always an uncertainty about these assets because they are confidential, and may not transfer to the new owner in case of a sale. BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s infrastructure assets have a book value of $2.5 billion. But in reality, its infrastructure assets may not have any value because networking equipment is amortized over five years. Based on the square footage, the maximum value could go up to $1.1 billion.


  • BlackBerry’s Patents

Bernstein estimates the value of BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s IP portfolio between $800 million – $1.5 billion. BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) has spent a lot of money on intangible IP licenses over the past. But they may not have a great market value because they are non-transferable. And a large part of other patents it acquired were related to 2G technology, so that may not have a great market value today. The only sweet spot is Elliptic curve cryptography, which has become increasingly important in data security. In 2009, BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) acquired Certicom. As a result, the Canadian company is a market leader in Elliptic curve cryptography patents.



  • QNX

Bernstein values QNX at around $200 million, almost similar to what BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) paid to acquire it in 2011. Though some investors have been optimistic about QNX, Ferragu says that the business is unlikely to go beyond its existing fields.