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Updated: Sat, 21 Sep 2013 16:15:00 GMT | By Deirdre McMurdy, MSN Money

What BlackBerry is really worth

As the auction process gets underway, it will be hard to calculate the company’s true value.


Deirdre McMurdy

On Bay Street, it’s known as “guidance” when a company provides early warning about financial results that have yet to be released.

In the case of BlackBerry, however, the second quarter preview it just provided is nothing as gentle as guidance. It’s more like slamming a car into a wall at full speed.

The company’s shares plummeted on news that the already hobbled business will post a loss of close to $1 billion for the second quarter of its fiscal year. That reflects a backlog of unsold Blackberrys as well as a $72 million restructuring charge.

It also confirmed it will cut about 40 per cent of its remaining global workforce in an effort to trim its operating spending in half.

But by far the most dismal news is that the forecast for BlackBerry sales is about 3.7 million for the quarter. That’s down from 7.4 million a year earlier.

In a strange twist, the homegrown former tech darling launched a new flagship smartphone, the Blackberry Z30, just days ago. The product is being rolled-out for sale in the Middle East and the U.K. first, with Canada and other markets to follow.

A U.S. launch is conspicuously absent: where Blackberry once had over 50 per cent of the market, it has now slipped below the three per cent mark.

The Z30 is the fourth new device launched so far this year on the Blackberry 10 operating system. The technology got good reviews, but corporate customers understandably aren’t inclined to upgrade to a system that may not be supported in future.

The latest — and final — launch of the suite has the added drag of coinciding with the much-hyped release of Apple’s new iPhone 5S and the cheap ’n cheery iPhone 5C.

The same thing happened earlier this year when the smartphone version of Microsoft Windows 8 beat Blackberry 10 to market by a few months. Carriers may be keen to have a third option beyond Apple’s iOS and Android, but you’ve got to be there and you’ve got to have all the shiny apps that customers crave.

Of course, it’s hard to be optimistic about buying a product from an outfit that has not only stuck “for sale” stickers all over its face, but has even undertaken preliminary consultations with the federal government to pre-pave the way for a potential foreign suitor.

(Although it wasn’t foreseeable when he was hired in 2011 as director of global public policy, Mark Cameron, a former aide to Prime Minister Stephen Harper, will certainly be a handy man to have about Ottawa as the sale process (hopefully) gets underway.)

So far, no obvious bidders have surfaced. Microsoft recently bought Nokia, so is now out of the running. Efforts to create a coalition of Canadian pension funds to buy the company have reportedly floundered as well. As future pensioners, that’s something for which we should probably be grateful.

Much as a homeowner “fluffs” a house before putting it on the market, Blackberry management seems to be making every effort to draw the eye to its best features and away from the cracked and leaking corporate foundations.

That means aggressively cutting back on the handset manufacturing part of the business, and throwing a spotlight on the value embedded in the company’s patents and intellectual property, software, customer base and service revenue. And then, of course, there’s the matter of the $2.8 billion in cash sitting in the BlackBerry piggybank.

Winding down the handset business is smart because analysts give it very little market value — in fact, it could cost close to $1 billion to wrap it up.

Similar to when the remnants of Nortel Networks were auctioned off in a bankruptcy in 2009, Blackberry’s patents are probably the most compelling asset. They’re valued at around $4.5 billion — possibly a bit of a premium for a competitor.

The enterprise data infrastructure that supports the company’s famously secure messaging is pegged at about $1.2 billion in market value. That’s a shrinking figure though, because the number of subscribers has already declined to about 70 million down from 80 million at the end of last year.

Just like in reality shows where people bid on the contents of foreclosed storage lockers, the parts of the company are worth more than the whole — in BlackBerry’s case coming in at around $5.5 billion.

The catch, however, is that human nature being what it is, all the publicity around the company’s fall from grace is likely going to create the expectation that steep discounts and stink bids will fly.

And given these latest results, there’s a good chance that bargain hunters have just marked down their valuations of Blackberry once again. 

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