BlackBerry Ltd, on the block as its smartphone business struggles, is in talks with Cisco Systems, Google Inc and SAP about selling them all or parts of itself, several sources close to the matter said.
Such a deal would be an alternative to the preliminary agreement reached weeks ago with a group led by BlackBerry’s biggest shareholder, Fairfax Financial Holdings, to take the company private for about US$4.7 billion, a bid which has faced some skepticism because of financing doubts.
The Ontario-based company — formerly known as Research In Motion Ltd — has asked for preliminary expressions of interest from potential strategic buyers, which also include Intel Corp and Asian companies LG Corp and Samsung Electronics Co, by early next week.
It is unclear which parties will bid, if any. However, the potential buyers have been especially interested in BlackBerry’s secure server network and patent portfolio, although doubts about the assets’ value are an issue, the sources said.
Possible bidders are proceeding with caution given the uncertainty around BlackBerry, which last month reported a quarterly loss of nearly US$1 billion after taking a writedown on unsold Z10 phones.
The value of BlackBerry’s patent portfolio and licensing agreements is likely to halve in the next 18 months, a company filing shows, potentially limiting its attractiveness.
According to analysts, BlackBerry’s assets include a shrinking yet well-regarded services business that powers its security-focused messaging system, worth from US$3 billion to US$4.5 billion; a collection of patents that could be worth up to US$3 billion; and US$3.1 billion in cash and investments.
Adding to the company’s woes, it is likely to burn through almost US$2 billion of its cash pile in the next year-and-a-half, Bernstein analyst Pierre Ferragu wrote on Thursday after studying the filing.
Private equity firms that have showed interest in BlackBerry — which also include Cerberus Capital Management — have asked the company and its advisers to provide additional financial details about its various business segments, two of the sources said. That process could take another few weeks, as BlackBerry focuses on taking bids from industry peers, the sources said.
“The special committee, with the assistance of BlackBerry’s independent financial and legal advisors, is conducting a robust and thorough review of strategic alternative,” a BlackBerry spokesman said in an e-mailed statement.
Separately, a BlackBerry shareholder sued the company and its executives on Friday, accusing them of inflating the stock price by painting a misleadingly rosy picture of the business prospects of its BlackBerry 10 smartphone line.
BlackBerry misled investors last year by saying that the company was “progressing on its financial and operational commitments,” and that previews of its BlackBerry 10 platform were well-received by developers, according to shareholder Marvin Pearlstein in a lawsuit lodged in Manhattan federal court.
Pearlstein is seeking to represent a class of “thousands” of shareholders who bought stock between Sept. 27 last year, when the company touted its strong financial position, and Sept. 20 this year, when it revealed it would have to write down between US$930 million and US$960 million related to unsold BlackBerry 10 devices, the lawsuit says.