Why Prem Watsa Loves the Company

Everyone knows that BlackBerry Ltd (NASDAQ:BBRY) is now not even a competitor in the smartphone space, the company has been reduced to a niche player, but still there are a few people who have bet big on BlackBerry and continue to hold their bets. Prem Watsa, Founder of Fairfax Financial Holdings, is one of them. Last year he tried to purchase BlackBerry at $9 per share, but the deal went awry after the due diligence. He still is optimistic about the company as is evident from his continuing stake in BlackBerry’s stocks and his purchase of the company’s convertible debentures. One can catch a glimpse of why Watsa likes BlackBerry Ltd (NASDAQ:BBRY) so much, by going through the annual letter to Fairfax’s shareholders from earlier this year.

Prem Watsa

One of the primary reason that makes Watsa optimistic about BlackBerry is the credentials of the company’s new CEO, John Chen. Mr. Chen emigrated to the U.S. from Hong Kong at the age of 16, after which he gained a Bachelor’s degree in electrical engineering from Brown and a Master’s from Caltech. His most outstanding achievement is the turnaround of Sybase, When MrChen took over Sybase in 1998, it had lost money for four years, its stock price was down 90% and most analysts were predicting bankruptcy within six months. Within a year, Sybase was profitable and in 2010, 12 years later, SAP bought it at $65 per share, more than ten times the $5 –$6 per share it sold at when Mr. Chen took over. He has also been on the Board of Wells Fargo -which is one of the biggest banks in the World- for eight years and Disney for ten years.

Watsa also enumerates Mr. Chen’s achievements since he took over BlackBerry, which includes a joint venture with Foxconn to manufacture low cost phones for emerging markets, bringing back the ‘‘BB Classic’’ phone (the Q20) and saying publicly that BlackBerry would break even by the fourth quarter of fiscal 2015.

Another thing that makes Watsa optimist is that he feels the market is highly overvaluing tech companies like Twitter Inc (NYSE:TWTR), Facebook Inc (NASDAQ:FB) and others. He provided a sobering comparison between Twitter Inc (NYSE:TWTR) and BlackBerry, which demonstrated in some ways that why BlackBerry is not such a bad bet after all.

“Twitter went public, just after BlackBerry, announced its convertible debt issue, at $26 per share, giving it a market value of $18 billion. It had revenues of $665 million and losses of $645 million, and most investors could not get a single share unless they were very good clients of the major houses underwriting the issue. On that day, BlackBerry traded in excess of 100 million shares at $6 per share, giving it a market value of $3 billion. BlackBerry had revenues of approximately $8 billion with cash of $2.6 billion and no debt other than the new convertible debt to be issued,” Watsa said in the letter.

Prem Watsa also tried to take BlackBerry Ltd (NASDAQ:BBRY) private last year, although his bid was rejected. He also decided to commit $1.0 billion to invest in the company. According to Fairfax’s latest 13F filing, the fund owns over 46.65 million shares of Blackberry.

Disclosure: None

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!