A tech giant that used to be great is bowing out at a seemingly low price. Some activists are arguing that public investors aren't being cashed out at a high enough price, but we all know how this will end.
BlackBerry's (BB 4.91%) endgame as a public company is starting to sound a lot like what happened to Dell (DELL.DL) earlier this year. There were activists arguing that Dell should be worth more than $24 billion on the way out. Carl Icahn was loud and full of ideas, but at the end of the day no one was willing to step up with a better offer. Dell sweetened its offer a bit, but that was the end of that.
The deal to take BlackBerry out at $9 a share is fair only until someone is willing to realistically pay more. Just because someone's on CNBC arguing that it's worth closer to $14 a share doesn't make it so. What is BlackBerry worth you may ask? Well, let's add up the parts.
BlackBerry has a ton of dough on its books. We're talking nearly $3.1 billion in cash, equivalents, and investments as of its latest quarter. That would be a cozy mattress if the smartphone pioneer had a clear path of consistent profitability in the future, but we know that's not the case. BlackBerry stunned the market on Friday by warning that it would post a net operating loss of as much as $995 billion. The good news is that the deficit consists entirely pre-tax inventory and restructuring charges. The bad news is that BlackBerry is unlikely to return to profitability anytime soon.
Then we get to BlackBerry's patents, its fading handset business, BBM, and its enterprise data infrastructure business. Even if one argues that the handset business is worthless at this point -- there is no market for fourth place (and shrinking) in smartphone mobile operating platforms -- surely there's money in BlackBerry's other assets.
There is, but what's the point in breaking out the calculator and throwing assumptions around? Fairfax's consortium already did that, and it arrived at $4.7 billion, or $9 a share. Until somebody else works out kinder math and is willing to put their money where their assumptions are, that's exactly what BlackBerry's worth.
There was no shortage of people arguing that Dell should hold out for more, but none of them were willing to cut the check. We may find the same thing here.
Is it painful to see BlackBerry bow out at $9? Sure. Microsoft (MSFT -1.16%) was supposed to have paid far more for BlackBerry a few years ago.
"I'm fairly certain they have a standing offer to buy them at $50 (a share)," analyst Peter Misek told Reuters five years ago. It never happened, of course. BlackBerry fell below $40, $30, $20, and now $10 and Mr. Softy was nowhere to be found. Microsoft instead decided to throw its weight behind its own platform, and it's telling that it was willing this summer to pay more in its $7.2 billion purchase of Nokia's devices and services business than BlackBerry will ultimately punch out for.
Going private was Dell's only hope, and the same thing applies to BlackBerry. If there is a turnaround that can materialize at either company it's going to have to take place away from the market's sharp scrutiny and quarterly performance reviews.
Unless anyone bellyaching about BlackBerry cashing out in the single digits is wielding a bigger check, this is the way the story ends.