BlackBerry's fate uncertain as buyers appear scarce

BlackBerry's (NASDAQ:BBRY) announcement that it is looking at "strategic alternatives," including joint ventures, strategic partnerships or alliances or a sale of the company, prompted speculation about which companies might buy BlackBerry. The early consensus from financial analysts is that there aren't many obvious takers at this point.

BlackBerry, which made a similar announcement in March 2012, has more than $3 billion in cash alone, no debt on its balance sheet and a trove of wireless patents. However, the company's subscriber base shrunk by 4 million last quarter, analysts think its core advantages in enterprise security are not as strong as they were several years ago, and it remains far behind Google's (NASDAQ:GOOG) Android and Apple's (NASDAQ:AAPL) iOS in smartphone market share.

"We struggle to see who might buy BlackBerry given the ongoing turnaround challenges," Nomura analyst Stuart Jeffrey wrote in a research note, according to AllThingsD. "Any bidder would likely have to be proficient in company turnarounds to generate value from a BlackBerry acquisition. Few companies in tech seem to have that skill set, with most focused on technology acquisitions only."

"We struggle to identify potential buyers that would pay a premium to the current share price," Canaccord Genuity analyst Mike Walkley wrote. 

Several companies that have been mentioned in the past as possibly interested in BlackBerry, including Microsoft (NASDAQ:MSFT), Huawei and Lenovo. However, there are several hurdles that could hold back any of those companies from seriously considering BlackBerry. Microsoft is pursuing its own smartphone strategy with its Windows Phone platform. Chinese vendor Huawei would need to contend with national security concerns in Canada about the deal, and has never made a significant acquisition. Huawei declined to comment, according to the Wall Street Journal.

Lenovo has indicated it would be interested in looking at Blackberry as part of a wider review of the mobile market. Lenovo CEO Yang Yuanqing told French newspaper Les Echos in late March that a deal with BlackBerry (NASDAQ:BBRY) "could possibly make sense, but first I need to analyze the market and understand what exactly the importance of this company is." His comments come after Lenovo CFO Wong Wai Ming told Bloomberg in January that the company was "looking at all opportunities," including BlackBerry.

Lenovo said in June it is in "preliminary negotiations with a party in connection with a potential joint venture transaction," according to a filing the company made with the Hong Kong stock exchange. Lenovo did not indicate which company it is holding talks with. The company said it has not yet struck a deal with the unnamed potential partner.

A Lenovo spokesman told the Journal the company cannot comment on BlackBerry specifically. "It has always been our goal to find companies that, when integrated with Lenovo, will effectively supplement organic growth and produce new synergies that enhance our overall business and return on capital," the spokesman said.

If an outright acquisition appears unlikely, one possibility that continues to engender speculation is that BlackBerry could go private. Prem Watsa, chairman and CEO of Fairfax Financial Holdings, which holds a 9.9 percent stake in BlackBerry, resigned Monday from BlackBerry's board due to "potential conflicts that may arise" during the company's strategic review process.

According to reports in the Globe and Mail and AllThingsD, which cited unnamed sources, Fairfax is holding discussion with several private equity and industry players that might be interested in a buyout. Watsa has said Fairfax aims to hold onto its stake in BlackBerry, and has said he feels that the market is undervaluing the company.

A BlackBerry spokeswoman declined to comment, as did Fairfax President Paul Rivett, according to Bloomberg.

There has also been speculation that Canada will not allow a foreign takeover of BlackBerry. "We recognize BlackBerry is exploring strategic alternatives to enhance its competitiveness; we wish (it) well. However, we do not comment on speculation," Sebastien Gariepy, a spokesman for Canadian Industry Minister James Moore, according to Reuters.

For more:
- see this WSJ blog post (sub. req.)
- see this separate WSJ blog post (sub. req.)
- see this AllThingsD article
- see this Globe and Mail article
- see this separate AllThingsD article 
- see this Reuters article
- see this Bloomberg article

Related Articles:
BlackBerry looking at 'strategic alternatives,' including sale of company
Report: BlackBerry considering going private amid smartphone struggles
ComScore: Android's U.S. growth plateaus in Q2, BlackBerry in freefall
IDC: Apple's share of smartphone market dips to 13.2% ahead of new iPhone
BlackBerry's PlayBook tablet chief set to leave company
Rumor Mill: BlackBerry A10 to pack Qualcomm processor, Verizon support
BlackBerry investors grill CEO about weakness in U.S. market

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