Following the news that BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) has signed an agreement to be acquired by Fairfax Financial Holdings Ltd (TSE:FFH) (OTCMKTS:FRFHF) for $4.7 billion, subject to a successful due diligence process, Jan Dawson, chief telecoms analyst at Ovum has the following comments:
Jan Dawson comments on BlackBerry’s acquistion
Taking BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) private doesn’t solve the fundamental problems at the company. First, the company’s device sales are cratering, and its announcement last week that it no longer intends to pursue the consumer market is essentially the death knell for this business. BlackBerry’s supply chain relies on scale for profitability, and it will never again be able to achieve the scale necessary to make money on devices. It’s likely that BlackBerry will be out of the device business entirely by the middle of next year. The next challenge is that BlackBerry’s other businesses are all to a greater or lesser extent dependent on its devices business.
Worm Capital July 2020 Performance Update: Up 152% YTD
Worm Capital performance update for the month ended July 31, 2020. Q2 2020 hedge fund letters, conferences and more Long/Short Equity Growth Strategy Net Performance Long-Only Equity Growth Strategy Net Performance
BlackBerry Messenger’s installed base is entirely on BlackBerry devices, and its launch on iOS and Android was aborted over the weekend. It’s mobile device management business is entirely based on its ability to manage BlackBerry devices, and its cross-platform management is much less well established than those of major competitors like MobileIron and Airwatch. If you strip out BlackBerry’s use of its QNX operating system for BlackBerry devices, you’re left with a business that’s worth less than $100 million. About the only part of BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) that looks to be worth a significant amount at this point is its patent portfolio, and that certainly wouldn’t justify the purchase price on its own.
“Normally, companies are taken private in order to give a long-term strategy time to payoff without the hassles of short-term investor scrutiny. But BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s key problem for the last couple of years has been the lack of such a long-term strategy. It simply hasn’t articulated a way to rebuild its business as its device sales drop precipitously. Unless Fairfax Financial Holdings Ltd (TSE:FFH) (OTCMKTS:FRFHF) plans to radically change or accelerate BlackBerry’s strategy, it’s unlikely to be able to turn the company around. And that means we’re likely seeing the beginning of the end for one of the most iconic brands in mobile technology.”