Investors Can't Crack a Smile at BlackBerry's Sale

So Prem Watsa came through in the end for BlackBerry (NASDAQ: BBRY  ) investors after all. His Canadian insurance company Fairfax Financial (NASDAQOTH: FRFHF  ) has agreed to buy the beleaguered smartphone maker for $9 per share, or $4.7 billion.

BlackBerry Q10. Source: BlackBerry.

As much of a white knight as Watsa may seem, he barely gave investors a premium at all to the closing price of BlackBerry's stock the day before, and -- with shares closing below the offer -- they're not hopeful any better bid will come through despite a six-week attempt to suss one out. It highlights just how damaged this once high-flying company is, and how low it has fallen.

I'll admit I didn't think Watsa would step up. The smartphone maker only has a 2.7% share of the market in the U.S., according to the industry watchers at International Data, and just under 3% worldwide over the first six months of 2013.

In the years since the nickname "CrackBerry" was used as a badge of honor highlighting its addictive qualities, Google (NASDAQ: GOOGL  ) has come to dominate the smartphone world with its Android operating system, owning nearly three-quarters of the market, while Apple's (NASDAQ: AAPL  ) iOS is a distant second with share of less than 17%. According to IDC, the third place Windows Phone from Microsoft hasn't even cracked more than 4% of the market.

The analysts don't expect that to change all that much over the next few years, either. While the Windows Phone OS will finally break into double-digit percentages due to its acquisition of Nokia, it will be a long time coming, and its gains on Apple won't be dramatic.

BlackBerry is expected to fall below 2% market share by 2017 despite its heralded BB10 operating system (which really hasn't caught on) and its Z10 and Q10 phones (which have failed to spark the imagination). The company told investors last week that just 5.9 million units were sold over the past quarter. Compare that to Apple's iPhone 5 -- in both iterations -- which sold 9 million units in one weekend, even though the market didn't appreciate the pricing schedule Apple undertook. Still, it's believed the higher-end 5s even sold out.

Samsung has made the most out of the Android system with its hugely popular Galaxy series of smartphones, catapulting it to the top of the seller ranks where it dominates the competition. And Google is partnering with Nestle to start co-branding its Android operating system and the chocolate maker's KitKat bar, showing a willingness to think outside the box (or wrapper). 

Although Watsa's offer brightens up the outlook for the handset maker, it's not really enough to cheer up the diehard BlackBerry investor or user. But it does offer a window into the mind-set of the investor often called Canada's Warren Buffett. Taking BlackBerry out of the public eye and giving it time to get its house in order again may be what's needed to ensure the business survives intact; I tend to agree with my Foolish colleague Alex Dumortier, who says that Watsa is throwing good money after bad.

Of course, it would also give him a chance to buff up the company's parts and sell them off piecemeal. Whether that could actually happen, considering the current lack of interest in the company -- and Watsa's Buffett-like penchant for making long-term investments -- investors are going to have to settle for what they can pick among the ruins.

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  • Report this Comment On September 26, 2013, at 10:41 AM, H3D wrote:

    How about some consistency.

    "...The smartphone maker [RIM/BBRY] only has a 2.7% share of the market in the US.... Google has come to dominate the smartphone world with its Android operating system, owning nearly three-quarters of the market, while Apple's iOS is a distant second with share of less than 17%..

    First you establish that you are talking about the smartphone market in the US.

    And them without saying you switch to numbers for WORLD share of Smartphone operating system installations.

    1) Google has a negligible share of the smartphone market, both worldwide and in the US. Motorola long since lost the plot.

    2) Apple has a larger share of the US smartphone operating system market than Google. And Apple's share includes the hardware too.

    3) Worldwide, Google has a larger smartphone operating system share than Apple, where this is dominated by loss making super cheap devices. But, even this isn't a MARKET share, since Google have to give it away to get people to use it. Look market up if you don't know what it means.

  • Report this Comment On September 26, 2013, at 12:21 PM, OracleofOmahaha wrote:

    Throwing good money after bad is exactly right. Watsa is only offering to buy the company in the hope that he can save his current 10% stake in bbry from going down the drain. The smart play is to just take your losses on a bad investment decision and move on. But that takes disciplined investing.

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