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Will Friday's BlackBerry Earnings Release Spark a Bidding War?

By Dan Caplinger – Sep 25, 2013 at 5:05PM

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BlackBerry already announced disappointing preliminary figures, but will the full report lead to competition against Fairfax Financial's bid?

BlackBerry (BB -1.58%) will release its quarterly report on Friday, but thanks to a preliminary release of some of its results, investors already know that the quarter was a terrible one. The big question facing shareholders on Friday is whether the BlackBerry earnings report will dissuade Fairfax Financial (FRFHF -1.37%) (FFH -0.86%) from its buyout offer for the struggling smartphone pioneer, or whether it could inspire a rival bidder to step forward.

BlackBerry has gone from rags to riches and back again in the space of less than a decade, as its once-groundbreaking smartphones have largely given way to rival products from Apple and a wide variety of manufacturers using Google's Android operating system. Android has taken commanding market share throughout the smartphone space, while Apple has kept its strong position in the high end of the market with its long line of iPhone successes. Can BlackBerry survive as it has sunk into fourth place in the mobile market? Let's take an early look at what's been happening with BlackBerry over the past quarter and what we're likely to see in its report.

Stats on BlackBerry

Analyst EPS Estimate


Year-Ago EPS


Revenue Estimate

$1.93 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

What will BlackBerry earnings do to the Fairfax bid?
As little as a week ago, analysts had much more optimistic expectations for BlackBerry earnings. But the company's pre-announcement of earnings sent those expectations plunging, as BlackBerry said that it would post an adjusted net loss roughly triple what investors had thought. Revenue plunged to about $1.6 billion, and although those figures don't include a substantial number of BlackBerry 10 sales, the company took a massive inventory charge of between $930 million and $960 million to reflect competition in the smartphone space. BlackBerry shares plummeted, bringing the stock's total losses since late June to about 40%.

BlackBerry has known for a while that it needed to make major changes in order to survive. Last month, the company used the traditional buzzwords of seeking "strategic alternatives," indicating that it was positioning itself for a breakup, asset sale, or full-blown acquisition. With Apple using its proprietary iOS operating-system software, Motorola and Samsung reliant on Google's Android, and the merger of Nokia's smartphone business and Microsoft, BlackBerry's new BB10 operating system was left to fend for itself on the hardware front.

But the bid from major shareholder Fairfax Financial to buy out BlackBerry for $9 per share has analysts wondering if BlackBerry can fare better as a privately held company. The bid is far from a done deal, as Fairfax has the right to back out of its $4.7 billion bid after conducting due diligence. For its part, BlackBerry can seek rival bids, but most of those following the company don't expect it to be successful in finding another interested buyer.

The big question for BlackBerry's future is whether its streamlined strategic plan for smartphones in development will inspire current customers to stick with the company. The company released its Z30 handset last week, which uses a power-saving OLED screen and carries some other advantages compared to its Z10. But with Apple and Google phones offering more innovative features and better performance, the Z30 isn't likely to rescue BlackBerry.

In the Friday BlackBerry earnings report, look closely to confirm the figures the company gave in its preliminary figures and to assess any additional information it gives in light of Fairfax's buyout offer. If anything happens to scuttle the Fairfax deal, shares could be headed for another wave downward.

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Fool contributor Dan Caplinger owns shares of Apple. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google. 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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