Blackberry worth about $5 billion
But buyers want assets like patents — not phone unit: Analysts
BlackBerry Ltd.’s withering smartphone business means potential buyers will pick over its more alluring assets, including software and patents, which together may be worth about $5 billion, roughly in line with the company’s current market value.
The phone unit, BlackBerry’s biggest source of revenue, is essentially worthless because most buyers would shut it down in favour of their own technology, at a cost of as much as $800 million, said analysts at Raymond James Ltd. and BMO Capital Markets. Its patents, software and a secure network are each worth more than $1 billion, the analysts said, and the company has about $2.8 billion in cash.
The Waterloo, Ontario-based company appointed board members last week to analyze a sale or new partnerships to try to turn the company around. The value of the hardware unit may plummet further as customers shy from a device whose future is up in the air, leading potential buyers of the company to gravitate to BlackBerry’s other assets, Brian Huen, managing partner at Red Sky Capital Management, said by phone on Monday.
“You’re effectively killing that business by saying ‘I’m up for sale,’” said Huen, whose Toronto-based firm manages about $220 million in assets, including BlackBerry shares.
Lisette Kwong, a spokeswoman for BlackBerry, declined to comment yesterday about a potential breakup and sale of the company’s parts.
Meanwhile, Industry Minister James Moore said that while the federal government wishes BlackBerry well in its turnaround efforts, it’s up to the company to reignite interest in its products. “This is a Canadian company with a long track record of stirring up innovation and important changes in the products we all use,” Moore said Wednesday. “They employ a great number of Canadians. It’s been a source of Canadian pride and we hope that they do well.”
The company’s cash reserves will be worth about $2.6 billion at the end of this fiscal year. Its patents and other intellectual property might fetch $1 billion; the network would be worth $1.2 billion; and the software about $1.5 billion, said Tim Long, an analyst at BMO Capital Markets in New York, in an Aug. 13 note to clients.
Subtracting the $800 million estimated cost of shutting down the handset businesses, that would give BlackBerry a sum-of-the-parts value of about $5.5 billion, or $10.50 a share.