$4.7 billion bid for BlackBerry yet to create smartphone demand

Prem Watsa – the Indian born CEO of Fairfax Financial Holdings — is confident to fund its $4.7 billion bid for BlackBerry. But select markets and telecom operators are giving thumbs down to the revival of the smartphone maker.

“We wouldn’t put our name to such a high-profile deal if we didn’t feel confident that at the end of the day that our due diligence would be fine and we’d be able to finance it,” Watsa told Reuters.

But mobile markets such as India and America have already started rejecting BlackBerry smartphones.

BlackBerry Z10 at reduced rates

Unable to find enough takers, BlackBerry India said customers can purchase BlackBerry Z10 smartphone at Rs 29,990.

The $4.7 billion bid to buy BlackBerry has already received negative feedback from telecom industry analysts. “BlackBerry’s supply chain relies on scale for profitability, and it will never again be able to achieve the scale necessary to make money on devices. It’s likely that BlackBerry will be out of the device business entirely by the middle of next year,” said Jan Dawson, chief telecoms analyst at Ovum.

BlackBerry troubles go up

America ditches BlackBerry

Telecom operator T-Mobile plans to stop carry BlackBerry smartphones on its store shelves, though it will continue to sell them online and let customers order the devices from its retail locations.

However, AT&T is not pulling the plug on BlackBerry.

Last week, Verizon said it planned to carry BlackBerry’s upcoming Z30 smartphone. Verizon said it continues to sell online and in stores.

Sprint declined to comment.

BlackBerry, which put itself on the block in August, on Monday accepted a tentative $9 a share offer from a mostly Canadian consortium led by domestic insurer Fairfax Financial Holdings, BlackBerry’s shareholder with a 10 percent stake.

BlackBerry reports financial results on Friday, but cancelled plans for a conference call with investors because of the Fairfax bid. Earlier, the Ontario-based device company said it would report around $1 billion loss on a revenue of around $1.6 billion in this quarter. Elimination of jobs creates uncertainty to Canada’s economy.

BlackBerry patent value

Globe and Mail said on Wednesday that BlackBerry currently has about 7,500 patents and applications, of which roughly 4,200 have been granted, according to Ottawa-based intellectual property firm Chipworks.

Perhaps the most valuable patents in BlackBerry’s arsenal relate to security – a field in which the company still stands head and shoulders ahead of its competitors. Roughly 2,500 BlackBerry patents relate to secure messaging and digital transactions.

Senior Bernstein Research analyst Pierre Ferragu estimates the value of BlackBerry’s portfolio at between $800-million and $1.5-billion, depending on how many of the patents relate to previous generations of wireless technology. For many analysts, who often attribute zero value to some other parts of BlackBerry’s business, patents represent the most lucrative portion of the company.

No serious suitors?

Mobile industry feels that BlackBerry is not getting the right suitor and Watsa is not the right investor to bring back glory. Watsa may be looking at protecting his current investment through an additional investment.

Watsa declined to name any of the other potential investors. Fairfax does not plan to contribute more than its existing stake in BlackBerry and has left itself the option of withdrawing the bid after reviewing BlackBerry’s books and operation.

According to a Globe and Mail report, Watsa was pitching the acquisition as a leveraged buyout that would be financed with more than $3 billion in bank loans, $1 billion in equity from institutions and Fairfax’s BlackBerry stake.

If it cannot raise enough equity to help finance the bid, the Globe said Fairfax intends to arrange a short-term bridge loan that could be repaid with BlackBerry’s cash holdings of about $2.6 billion.

Baburajan K reporting from Ontario
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