Analysis: Taking BlackBerry private may make sense, but not a quick fix

Sat Aug 10, 2013 7:14am EDT
 
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By Greg Roumeliotis and Euan Rocha

NEW YORK/TORONTO (Reuters) - A deal to take BlackBerry Ltd private could make sense from a financial standpoint, say private equity executives, though any such move won't by itself make the smartphone company more competitive.

The numbers for a leveraged buyout could still work, these executives said, after a Reuters report that BlackBerry's board was warming up to the possibility of going private as it fights to revive its fortunes.

The company's new openness to a leveraged buyout follows six weeks in which BlackBerry shares have taken a pounding, as sales of its new line of smartphones have so far failed to live up to the expectations of some analysts. The company is still bleeding subscribers and it faces an uphill battle to regain market share from Apple Inc's iPhone and devices that run on Google Inc's Android operating system.

Even so, the company has a core stable cash flow element that could support debt for a leveraged buyout, say some senior private equity executives involved in the sector. The sources asked not to be identified because they were not authorized to speak publicly.

BlackBerry is currently worth about $5 billion, but many of its investors like Ross Healy, a portfolio manager with MacNicol & Associates, whose clients own BlackBerry shares, note that the company has more than $3 billion in cash alone.

"My own analysis tells me that the stock is worth an awful lot more than $5 billion," said Healy.

While sources told Reuters that no deal is imminent and that BlackBerry had not launched an active sale process, its openness to going private signals a major shift in the thinking of its management, which has long focused on engineering a turnaround as a public company.

BlackBerry declined to comment on the Reuters report that its management is open to the idea of going private.   Continued...

 
A Blackberry smartphone is displayed in this August 12, 2010 illustrative photo taken in Hong Kong. REUTERS/Bobby Yip