Yesterday, BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) surprised the markets by announcing that its largest shareholder Fairfax Financial Holdings Ltd (TSE:FFH) has dropped its takeover bid. The Canadian smartphone maker also ousted its CEO Thorsten Heins and appointed John Chen of Sybase as its new CEO. The move sent the shares tumbling, as the stock closed Monday 16.41% lower at $6.49. Prem Watsa said he will rejoin the smartphone maker’s board.
BlackBerry to go through several quarters of operating losses
Research firm Nomura said in a research note to investors that investors are likely to shun the stock. BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) had $2.6 billion in cash at the end of August quarter. But the company announced Monday that it hoped to raise $1 billion in convertible bonds. It indicates that the Canadian company is building its cash reserves in preparation for a long period of cash burn. Nomura analysts Stuart Jeffrey and Woo Jin Ho said that BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) is likely to report several quarters of operating losses.
Analysts think that the failed takeover bid will worsen the sales of devices and services. And it will accelerate the search for an alternative buyer. Many investors including Cerberus Capital Management, Lenovo Group Limited (OTCMKTS:LNVGY) (HKG:0992) and BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) co-founders Douglas Fregin and Mike Lazaridis have expressed interest in acquiring the company.
However, no strategic buyer has emerged so far. If BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) doesn’t find a bidder, it will have to restructure operations significantly. Nomura doesn’t see a reason to buy the stock as long as BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) keeps selling smartphones below cost as services, subscribers, and revenues continue to slide. The newly appointed CEO John Chen is known for reviving Sybase when it was on the verge of bankruptcy. He needs to do the same miraculous turnaround at the Z10 maker.
Nomura has a Neutral rating on the stock with an $8 price target. BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shares rose 2.23% to $6.64 in pre-market trading after falling 16.41% on Monday.
