BlackBerry Ltd (NASDAQ:BBRY) has taken its investors on a roller-coaster ride over the past few years. The company changed its name, released a new phone, and rolled out a new operating system. Of these initiatives, though, not much has been able to impede BlackBerry's shocking fall.
The situation now takes an interesting turn, because it was revealed that a company signed a preliminary agreement to take BlackBerry private for $9 per share. Investors are either delighted or devastated on the news, depending on where they bought the stock. Nevertheless, this is far from a done deal, and investors need to weigh their options. At the present time, should investors (and BlackBerry itself) hold out for a better price? Or should investors jump off what likely amounts to a sinking ship?
Fairfax to the rescue Fairfax Financial Holdings, a Canadian insurance company, may purchase the 90% of BlackBerry shares that it doesn't already own, after a six-week period. The firm owns about 10% of BlackBerry stock, and agreed to possibly purchase the remaining shares for $9 apiece come November 4, for a total deal price of $4.7 billion. The agreement presumably kicks off a process where BlackBerry can now try to find a higher bidder for itself.
Meanwhile, Fairfax will continue to do its due diligence, a wise move considering BlackBerry's precarious situation. Sales and profits are simply falling off a cliff. The company saw revenue fall 40% in fiscal 2013 versus the prior full fiscal year. BlackBerry wasn't profitable in fiscal 2013, either, reporting a $628 million loss for the year.
Times haven't gotten easier this year, either, despite the release of the company's Z10 smartphone. On September 20, BlackBerry warned investors that it would lose between $950 million and $995 million this quarter. In conjunction with the announcement, the company said it would cut 4,500 jobs, and the stock fell 17% on the day. Looking back further, it's plain to see how far BlackBerry has fallen. In fiscal 2007, BlackBerry (then known as Research in Motion) booked a $631 million profit.
It's not entirely difficult to see how BlackBerry got into this situation. BlackBerry's devices and its operating system have failed to catch on with consumers, who have moved on to other devices, including the Android, offered by Google Inc (NASDAQ:GOOG), or Apple Inc. (NASDAQ:AAPL)'s iPhone. BlackBerry is even falling behind in the enterprise market, which it used to dominate. The Android and iOS operating systems together hold more than 92% of the smartphone market. BlackBerry's own OS holds exactly 2.7% of the market.
Furthermore, BlackBerry isn't expected to participate in the fast-growing worldwide mobile phone market, which research firm IDC expects to grow 7.3% this year. Again, Apple and Google dominate in smartphone sales. The iPhone and Android made up 92% of smartphones sold in the three-month period ended July 2013. BlackBerry's share actually dropped a full percentage point, to 4.3%.