BlackBerry (BBRY) Potential Strategic Buyers Unlikely to Unlock Value - Misek

October 7, 2013 7:48 AM EDT Send to a Friend
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Price: $9.49 +2.04%

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    5 Buy, 41 Hold, 16 Sell

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    Up: 39 | Down: 10 | New: 33
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Jefferies analyst Peter Misek commented on BlackBerry (NASDAQ: BBRY) Monday following news over the weekend that the company held sale discussions with Cisco, Google, and SAP and preliminary expressions of interest from other strategic buyers such as Intel, LG, and Samsung are believed to be due early this week.

"We continue to believe these strategic buyers would be able to unlock value from BlackBerry (in parts or whole), but the Canadian handset maker has failed to garner interest thus far," the analyst said.

Commenting on a possible break-up into three pieces, Misek highlights: 1) OS and consumer handsets: an Asian vendor like ZTE or Lenovo could offset ommoditization pressures by owning an OS with linkages to Android apps and a strong base in M2M. Patents, brand, and distribution might also have value. Splitting the consumer from the enterprise side could lessen the value but sidesteps U.S. national security concerns. 2) BBM: see this as attractive for a social networking/messaging player like Yahoo! or Google. 3) MDM, BES, enterprise handsets, and global NOC/node network: we see this as attractive to an enterprise IT player (e.g., Cisco, HPQ, IBM, Oracle, etc.). Given the move to the cloud we believe enterprises will want secure network connectivity, data compression, and a global data center network."

Misek still sees Fairfax Financial's $9/share bid as likely. "We believe Fairfax has secured $3B in bank loans (mainly due to BBRY's patents) but is still $1.2B short in terms of funding the $4.7B deal. We believe Plan A was to find several co-investors but that there is little appetite for BBRY as a whole. We believe Plan B is to obtain a bridge loan for 6 months for $1.2B and then use BBRY's own cash to pay it back once the deal closes. If Fairfax is unable to obtain the bridge loan, we think Plan C is to lower the bid to $7. We view this as a last resort as Fairfax's and Prem Watsa's reputation would be damaged by such a move."

The firm maintained a Hold rating and price target of $8.

For an analyst ratings summary and ratings history on BlackBerry click here. For more ratings news on BlackBerry click here.

Shares of BlackBerry closed at $7.69 yesterday.


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Comments

Your title doesn't match the text
Francois Coutlee on 2013-10-07 08:11:03
Mark as Spam | Reply to this comment

Your title says Unlikely, but your text says Potential buyer Likely????


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