[RyanGermann]

(I bolded the part I personally find most interesting)

Reuters
Nadia Damouni and Nicola Leske 2 hours ago

NEW YORK (Reuters) - A handful of potential bidders, including private equity firms, are lining up to look at BlackBerry Ltd, but initial indications suggest that interest is tepid and buyers are eyeing parts of the Canadian smartphone maker rather than the whole company, several sources familiar with the situation said.

Private equity firms are mostly interested in businesses such as BlackBerry's operating system and the patents around its keyboard, two of the sources said. However, one possibility is for a Canadian pension fund to team up with an investor to buy the whole company, which is currently worth a little more than $5 billion, one of the sources said.

BlackBerry's biggest shareholder, Fairfax Financial Holdings Ltd, has approached several large Canadian investment funds about forging a deal to take the smartphone maker private, Reuters reported last week.

Fairfax has a 10 percent stake, and its chairman and chief executive, Prem Watsa, has left BlackBerry's board already to avoid any possible conflict of interest as the company assesses its strategic options.

Nevertheless, in recent days a few private equity firms have signed confidentiality agreements or have agreed to meetings with the company to gain access to the company's books, the sources said, adding that the sale process was expected to start in a few weeks.

BlackBerry declined to comment.

The apparent lack of interest among private equity firms in the whole company underscores the challenges BlackBerry has been facing in competing with rivals such as Apple Inc's iPhone and devices using Google Inc's Android technology.

Its new BlackBerry devices hit store shelves this year just as the high-end smartphone segment was showing signs of saturation in markets such as the United States. Samsung Electronics recently reported results that fell shy of expectations, while Apple earlier this year reported its first quarterly profit decline in more than a decade.

The new BlackBerry device has so far failed to gain traction with consumers, and the company - which pioneered mobile email with its first smartphones and email pagers and was once a stock market darling - has seen its shares plummet. Its market value has fallen to $5.4 billion, from $84 billion at its peak in 2008. Shares closed down 1.4 percent at $10.28 on the Nasdaq on Friday.

Last month, the company said it was weighing its options, which could include an outright sale, after Reuters first reported that company's board was warming up to the possibility of going private.

Industry sources said several of the biggest private equity firms and some of the Asian hardware makers had decided against a deal for the company. Still, the sources added some BlackBerry's assets could be of interest to buyers.

According to analysts, BlackBerry's assets include a shrinking, yet well-regarded services business that powers its security-focused messaging system, worth $3 billion to $4.5 billion; a collection of patents that could be worth $2 billion to $3 billion; and $3.1 billion in cash and investments.

Even at a conservative estimate, that is more than the company's $5.4 billion market value. Analysts said the smartphones that bear its name have little or no value and it might cost $2 billion to shut the unit that makes them.

Many hurdles remain to a deal. Private equity firms have circled the company for more than two years and have tried without success so far to figure out ways to structure a deal.

Moreover, Ottawa reviews any big takeover of a Canadian company for competitive and national security reasons. Government officials have often said they want BlackBerry to succeed as a Canadian company, but concede they do not know how things will play out.

(Reporting by Nadia Damouni and Nicola Leske; Additional reporting by Soyoung Kim and Euan Rocha; Editing by Lisa Shumaker)

[donmateo]

Well, not much more than we already knew, but I still hope BB goes private. Seems like the least destructible option.

[pkcable]

Going private is what I think will happen, BUT hopefully with a strong new CEO. And certainly a new marketing chief!

[AYC2112]

I'm guessing BBRY wins some sort of government exception (see Nexen) and prepares itself for Lenovo and the untapped market in China. That little report about Lenovo offering $17/share never seemed to make the headlines.

Posted via CB10

[just_luc]

Going private is what I think will happen, BUT hopefully with a strong new CEO. And certainly a new marketing chief!

Alright.. alright.. you guys don't have to beg.. I'll do it.

I don't really want to move to Waterloo.. but we all make sacrifices..

[RyanGermann]

I did not think the Operating System would be of interest... unless they mean just bare QNX and not the BB10 'layer' on top. I guess I have my fingers crossed that Prem will take it private, because BlackBerry without BB10 and matching exclusive hardware is, well, kind-of pointless. To me, BlackBerry's sublime combination of form and function makes it my platform of choice, and breaking the two apart is, well... ask Apple how they'd like to cede control over either the hardware or iOS, or ask Samsung how much they want Tizen to succeed (open source, but Samsung is the main driver, they want that control).

[Bla1ze]

Hmm.. recycling rumors.

[RyanGermann]

Hmm.. recycling rumors.

I hadn't seen the keyboard patents specifically called out as being of interest to prospective buyers. It's not really surprising, but who do you think is the most likely candidate to purchase the keyboard patents? I guess Samsung.

[notfanboy]

According to analysts, BlackBerry's assets include a shrinking, yet well-regarded services business that powers its security-focused messaging system, worth $3 billion to $4.5 billion; a collection of patents that could be worth $2 billion to $3 billion; and $3.1 billion in cash and investments.

Even at a conservative estimate, that is more than the company's $5.4 billion market value. Analysts said the smartphones that bear its name have little or no value and it might cost $2 billion to shut the unit that makes them.

This was the most interesting part.

[RyanGermann]

This was the most interesting part.

The figures are mostly conjecture, but if the hardware unit would really cost $2 billion to shutter, it's another reason why the OS / Hardware should be given a proper run for the money before they ditch it altogether.

[RADEoN1337]

The figures are mostly conjecture, but if the hardware unit would really cost $2 billion to shutter, it's another reason why the OS / Hardware should be given a proper run for the money before they ditch it altogether.

i agree. there's way too much money and time tied up in this to just scrap it, especially since I am a huge fan of OS10 - I don't want to adapt to iOS/Android or WP8 if I don't have to. There's also way too much potential for an OS like this.

[mset]

The figures are mostly conjecture, but if the hardware unit would really cost $2 billion to shutter, it's another reason why the OS / Hardware should be given a proper run for the money before they ditch it altogether.

I'm just curious - you must have thought about the potential cost to an acquirer of revamping the hardware and working the OS to the point that it can compete with iOS/Android. What number did you use in the calculation to come up with the conclusion that shuttering the operation would be a money-loser?

Also, don't you feel like an acquirer would have to have one particular characteristic in order to even attempt to keep the hardware/BB10 effort going? Do you think a VC/PE firm would fit the bill?

[Troy Tiscareno]

I did not think the Operating System would be of interest... unless they mean just bare QNX and not the BB10 'layer' on top.

Agree. Given that the article talks about the smartphone business being a negative (up to $2B to shut it down), they're clearly talking about QNX being of interest to investors, rather than BB10.

[Kid Vibe]

Agree. Given that the article talks about the smartphone business being a negative (up to $2B to shut it down), they're clearly talking about QNX being of interest to investors, rather than BB10.

How can anyone say their hardware business is negative or worthless... I really don't understand how these analysts value the company sometimes.

[guitarrista]

I very much doubt it would cost $2 billion in cash outlays to wind down the phone production operations. My guess is a large portion of this figure would consist of asset write-downs. That would make this part of the business a special sort of problem to take on. The potential buyer would have a complex and interesting situation on their hands from a tax planning standpoint.

[Highcroft]

What number did you use in the calculation to come up with the conclusion that shuttering the operation would be a money-loser?

Severance packages. A company like Blackberry just doesn't lay-off people and throw them on the streets. I'm assuming the hardware division makes up a large percentage of the workforce and thus would take a lot of money to lay all of them off. There are also manufacturing contracts that would have to be broken and I'm sure there are other costs to it as well that I'm unaware of.

[mset]

Severance packages. A company like Blackberry just doesn't lay-off people and throw them on the streets. I'm assuming the hardware division makes up a large percentage of the workforce and thus would take a lot of money to lay all of them off. There are also manufacturing contracts that would have to be broken and I'm sure there are other costs to it as well that I'm unaware of.

You misunderstood my question. The guy I quoted said that an acquirer should try to save the division because it would cost $2BB to shutter. I asked if he had calculated the costs of saving the divsion, and if he had an idea about what type of acquirer could undertake that type of task.

[mset]

I very much doubt it would cost $2 billion in cash outlays to wind down the phone production operations. My guess is a large portion of this figure would consist of asset write-downs. That would make this part of the business a special sort of problem to take on. The potential buyer would have a complex and interesting situation on their hands from a tax planning standpoint.

I didn't want to give this away before getting an answer to the post above, but this is exactly right. I would go further and say that there would definitely be a big offset in booking the loss.

[jgrobertson]

Serena to me that the OS10 devices are a lot better than most are giving them credit for. With new leadership in critical areas, marketing and sales, it could still pull out of this depression.

Posted via CB10

[mset]

[Seems] to me that the OS10 devices are a lot better than most are giving them credit for. With new leadership in critical areas, marketing and sales, it could still pull out of this depression.

Right, and what type of firm can provide that leadership?

[Highcroft]

You misunderstood my question. The guy I quoted said that an acquirer should try to save the division because it would cost $2BB to shutter. I asked if he had calculated the costs of saving the divsion, and if he had an idea about what type of acquirer could undertake that type of task.

Yeah, didn't catch that part.

[RyanGermann]

I'm just curious - you must have thought about the potential cost to an acquirer of revamping the hardware and working the OS to the point that it can compete with iOS/Android. What number did you use in the calculation to come up with the conclusion that shuttering the operation would be a money-loser?

The $2 billion figure comes from the original Reuters piece, so I have no idea what was considered in determining that number: I take it on face value and suggest that the cost as a reason to NOT shut down hardware production "hastily".

I believe there is a market for BB10: a niche market at first, but a mass market in the long run if the niche market is built AND awareness of BlackBerry 10's merits is FINALLY communicated broadly and properly. The new manufacturer has to create "transitional" devices (that bring users from other platforms gracefully to BB10). Yes, if that means a device with hard "home" and "back" buttons SO BE IT. Build the darn thing! iOS didn't take over over night, but once people learned about its merits, it caught on: I believe the same is possible for BB10. Once BB10 has it's following and is understood, maybe THEN do away with hard "home" and "back" buttons, but until then, the majority of users, users with money, users that aren't thrilled with Android and iOS and ripe for the picking, they need them hard buttons, they just do. Current BB management's attitude that they must be strong and INSIST that gesture-based devices prevail in the short term is stupid stubbornness that has undermined BB10 adoption, but it's not to late to fix that. The "New" BB can say "we admit it: the world needs more time to get used to Gestures... so here's a new device with a home and back button that you can use while you're getting used to the full gestures." That doesn't mean that the OS has to change, just two simple little buttons.

[mset]

The $2 billion figure comes from the original Reuters piece

You misunderstood my question.

I'm not asking where the $2BB number comes from. You said that the $2BB is "another reason why the OS / Hardware should be given a proper run for the money". I am asking you what number you are using as an assumption about how much it would cost an acquirer to undertake this effort. You must have a number in your mind, because if you thought that the effort would cost i.e. $4BB, you obviously wouldn't advocate the attempt.

I take it on face value and suggest that the cost as a reason to NOT shut down hardware production "hastily".

I see you edited your post above to add this. If you don't have a number in mind before suggesting that the high cost is a reason not to shut it down, I suggest you avoid business as a career.

A hint to the problem with your analysis is given by guitarrista, and by the following:

I also asked you what type of acquirer would be required to undertake such an effort.

[7jai]

So if bidders want to carve up the business, how does this affect the stock price? I think it would make the stock tank some more no? Since the company is liquidating its assets to others...

I don't think BB will just sell "parts" of its business away. Doesn't make sense to me, and it doesn't solve the immediate problem at hand.

[m1a1mg]

How can anyone say their hardware business is negative or worthless... I really don't understand how these analysts value the company sometimes.

Simple, the high number to shut down the handset business is the cost of getting out of all the agreements to build phones. Last numbers I saw had BBRY on the hook for ~$5 B.