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

By Rich Duprey - Sep 25, 2013 at 9:30PM

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Even though they've been bailed out by billionaire investor Prem Watsa, there's not much to cheer about

So Prem Watsa came through in the end for BlackBerry (BB 2.22%) investors after all. His Canadian insurance company Fairfax Financial (FRFHF 3.04%) 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 (GOOGL -0.14%) has come to dominate the smartphone world with its Android operating system, owning nearly three-quarters of the market, while Apple's (AAPL -0.29%) 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.

Fool contributor Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

BlackBerry Stock Quote
$6.90 (2.22%) $0.15
Apple Inc. Stock Quote
Apple Inc.
$164.87 (-0.29%) $0.48
Alphabet Inc. Stock Quote
Alphabet Inc.
$117.30 (-0.14%) $0.17
Microsoft Corporation Stock Quote
Microsoft Corporation
$280.32 (-0.92%) $-2.59
Nokia Corporation Stock Quote
Nokia Corporation
$5.20 (-1.14%) $0.06
Fairfax Financial Holdings Limited Stock Quote
Fairfax Financial Holdings Limited
$533.34 (3.04%) $15.72

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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