Another investor is also reportedly exploring a potential bid

BlackBerry, Ltd. (TSE:BB) -- a business-centric pioneering firm that helped launch the smartphone market -- is effectively dead in the consumer market, sinking to less that 3 percent of total smartphone sales in Q2 2013.  But the company continues to fascinate investors who dream of possibly turning it around and repurposing it as a niche player in the smartphone market.

Billionaire Prem Watsa' hedge fund Fairfax Financial Holdings Ltd. (TSE:FFH) has received a tentative agreement to buy BlackBerry, Ltd. (TSE:BBfor $4.7B USD ($9 USD per share).  Fairfax is no stranger to the troubled phonemaker; it already owns a 10 percent stake, so the potential deal would be a buyout of the remaining 90 percent of shares.  However, investors remain fearful of a six-weeks due diligence clause in the purchase agreement, which means that Mr. Watsa's firm can back out at any time during the next month and a half.

If that deal falls through another potential bidder has emerged, according to The Wall Street Journal who reports that New York City hedge fund Cerberus Capital Management, L.P. is interested in adding the "distressed asset" to its portfolio.  The interest is reportedly in the exploratory stages; with Cerberus signing confidentiality forms so that BlackBerry can let it peek at internal financial records.

Cerberus, whose NYC headquarters is seen here, specializes in distressed assets.
[Image Source: AFP]

Cerberus specializes in distressed assets.  Not all of its bids have been successful.  In 2007 it joined a group of investors who acquired Chrysler, only to eventually lose a substantial chunk of equity when the market dried up in 2009 and Chrysler went bankrupt.  Cerberus currently holds approximately $20B USD worth of assets, including large stakes in some of America's top firearms makers, a source of recent controversy.

Given BB's dire finances it would not be surprising to see Cerberus lose interest.  The WSJ's source told the publication that Cerberus "may well opt against pursuing a bid."  The WSJ report also mentions that another distressed asset firm has been "sniffing around BlackBerry", although there's no indication who that might be or what phase their investigation of the struggling phonemaker is in.

Prem Watsa
Prem Watsa owns the most serious offer for BB, thus far. [Image Source: The National Post]

Mr. Watsa's offer represents a relatively attractive 12 percent premium over current share prices.  BlackBerry shares have plummeted in a free fall from a market cap high of $83B USD (~$148 USD/share) in June 2008 to a current market cap of $4.2B USD  (~$8 USD/share).  Some fear that shares prices will continue to drop and revenue will continue to retreat, prompting Mr. Watsa to rethink his tentative bid.

BlackBerries in the trash
Droves of clients are dumping BlackBerries. [Image Source: LihPao]

BlackBerry still has $2.6B USD in cash left, but it posted a net loss of $965M USD in Q2 2013.  BlackBerry 10 -- BlackBerry's long awaited new platform -- failed to impress customers when it finally launched in January.  BlackBerry has blamed weak sales of its BB10 Z10 smartphone for its fiscal woes.

Blackberry Z10
BB is in the process of firing 40 percent of its employees (roughly 4,500 jobs in total), as other firms like Google Inc. (GOOG) subsidiary Motorola Mobility look to scoop up this abandoned talent.  Those cuts won't come for free, though -- BB expects to reports losses of $400M USD as it pays termination packages to departing employees.  In addition to layoffs, BB is reportedly selling and leasing much of its Canadian real estate, in an additional last ditch effort to cut costs.

Source: WSJ

"People Don't Respect Confidentiality in This Industry" -- Sony Computer Entertainment of America President and CEO Jack Tretton

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