BlackBerry's Bleak Future

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Maybe BlackBerry (NASDAQ: BBRY  ) will be able to salvage something of itself, but after announcing in August that it was seeking "strategic alternatives," the news that Microsoft was buying Nokia makes it all the more imperative that it get a deal done -- and fast.

According to a report in The Wall Street Journal yesterday, it looks like the smartphone maker wants to get it completed by November, and though that's likely an effort to salvage something of value from its quickly fading relevance, BlackBerry's ability to remain the company you remember seems doubtful. If the rumors prove true, it will be carved up among several buyers, and that should put an end to a company that was already living on borrowed time.

While I was never much of a fan of BlackBerry -- not the smartphone and certainly not the company -- it has its share of diehard users and investors who refuse to let go. When Canadian investor Prem Watsa joined the board of directors, it was seen as both a vote of confidence and vindication that their faith in BlackBerry was warranted.

Unfortunately, as Warren Buffett has noted, "When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact."

Much of BlackBerry's future lay with the introduction of its BB10 operating system, and the launch of its Z10 and Q10 phones, and despite catcalls whenever someone pointed out a faltering effort, nothing has worked to stem the erosion of its position. And the public discussion of selling itself won't help sales in the least.

BlackBerry was afraid to report a firm number of BB10 units sold last quarter and, coupled with revenues and earnings that fell short of analyst expectations, its stock was crushed. Layoffs ensued, and then came the talk of a sale of the company. While it might have been able to wrangle a good deal for itself given time, I think the Microsoft-Nokia hookup is what ultimately becomes the death knell for realizing BlackBerry.

Having adopted the Windows Phone OS, Nokia is now permanently joined to Microsoft at the hip, just as Motorola's hardware is attached to Google's Android platform, and Apple products to its iOS. While Samsung and its popular Galaxy series would seem to be the one major exception to tying up hardware and software under one roof, the BlackBerry brand is left to become an even more distant also-ran.

Not everyone is convinced BlackBerry's position is completely untenable, but even among the handset maker's most ardent supporters, the real faint hope once again resides with Prem Watsa, and the hope that he can fashion a coalition of the unwilling. Having resigned from BlackBerry's board, it's thought he may make a play for the company; but, given the foregoing, and the fact the smartphone boom is consolidating, perhaps even stalling, that chance is at best slim, and what investors will end up with is a raspberry.

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9/27/2016 4:00 PM
BBRY $7.88 Up +0.06 +0.77%
BlackBerry CAPS Rating: *