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BlackBerry Is Falling Apart. Who Will Buy the Pieces?

By Dan Radovsky - Oct 7, 2013 at 7:00PM

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As BlackBerry finds it can't sell its product, is it worth more to investors on the scrap pile?

It seems pretty clear by now: BlackBerry ( BB 1.01% ) can't sell its handsets. The company's nearly billion-dollar writedown on primarily Z10 devices has made that fact painfully obvious.

So, as we seem to be nearing the end of BlackBerry's long goodbye, investors have to ask: Is there any value at all left in the company?

Reuters has been reporting there just might be. Its sources say in addition to the $4.7 billion offer from BlackBerry's largest shareholder, Fairfax FinancialCisco, Google, and SAP have held talks about acquiring the company -- in whole or, most likely, in parts. Other companies, such as Intel, LG, and Samsung, have been told that if they have any interest in BlackBerry, then let that be known by early this week.

Michael Lazaridis, the co-founder of BlackBerry who severed all corporate ties with the company this past March, has expressed concern about the company being torn apart. "It's really hurting me," he told The Globe and Mail. "Everyone is talking about the most likely scenario being that it will be broken up and sold off for parts."

The pieces of BlackBerry that may have independent value include its secure server network, the part of the BlackBerry phone system that appealed most to the company's corporate customer base. That piece of the pie is worth $3 billion to $4.5 billion, according to analysts cited by Reuters.

Another source of funds from a corporate estate sale could come from BlackBerry's patent portfolio, which includes the patents for the phone's original iconic keyboard. That collection could be worth $2 billion to $3 billion.

But there is a big "but" when it comes to BlackBerry's patents. The Globe and Mail quoted patent maven Florian Mueller as warning, "There may be a lot of value [to BlackBerry's patents] from an engineering standpoint, but if it's not what people want to buy, it doesn't matter. If the private equity people believe their big payoff is mostly coming from patents ... it could be a lot harder for them to get their money back than they think."

BlackBerry also has been considering selling its real estate holdings in Waterloo, Canada, according to The Globe and Mail. The company has valued all of its properties and land at almost $1.4 billion, according to a recent filing. After the company cut loose 4,500 workers (40% of its work force), certainly some of its more than 20 buildings in Canada's technology triangle could be sold.

And then there are BlackBerry's liquid assets. In its latest filing, the company reported it had $3.1 billion in cash and investments. But the longer the company holds off on selling itself -- in whole or in pieces -- the more cash it will burn just keeping its head above water. So, time is not on BlackBerry's side when it comes to squeezing maximum value from its assets.

But Fairfax chairman and CEO Prem Watsa, who has been called the Canadian Warren Buffett, indicated he is not in the market for pieces of BlackBerry. He told the Associated Press: "We thought long and hard before we offered $9 a share and we're not in the business of offering a number and at the last minute changing the figure. ... Rest assured when we do this it won't be done to split the company."

Fairfax is now going over BlackBerry's books as it performs its due diligence on its proposed purchase. As the the window on Fairfax's research will close on Nov. 4, current BlackBerry shareholders are holding their collective breath to see whether Fairfax will indeed follow through with its $9 a share purchase offer and maybe recoup some of their money.

For anyone thinking of buying BlackBerry at its current share price of around $8 and making a quick 12% profit -- if Fairfax makes good on its proposal -- I'd say they must like playing roulette: the Russian kind.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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