Why BlackBerry Shareholders Should Cheer $4.7 Billion Deal With Fairfax
It was less than a week ago BlackBerry announced a couple of potentially exciting roll-outs. First, its latest, greatest smartphone -- the Z30 -- was introduced as BlackBerry's, "biggest, fastest and most advanced smartphone" to date.
On the same day, BlackBerry said that BBM, BlackBerry's popular messaging service, was finally coming to all the Google Android OS and Apple iPhone users interested in a secure, real-time chat app. Ironically, BlackBerry introduced BBM for the masses under the mantra, "BBM For All." Unfortunately, almost as quickly as BBM was made available for download to Android and iPhone folk on Sept. 21, it had to be pulled because of "issues."
It gets worse -- much worse
It was a tough week for BlackBerry and its fans. After announcing preliminary fiscal Q2 2014 results that were downright depressing, the fumbled BBM rollout only added to the pain.
First, the very bad news. Leading up to this Friday's official earnings release, BlackBerry determined it would be a good idea to brace the market for what was coming. Turns out, what's coming is a nearly $1 billion loss for the quarter due, in large part, to a massive inventory writedown. But the bad news doesn't stop there.
BlackBerry expects about 3.7 million smartphones were sold in its fiscal Q2, hardly any of which are its new Q10 or Z10 alternatives. That compares to just over 6 million units sold in the second calendar quarter. Revenue should be around $1.6 billion, according to BlackBerry's preliminary announcement, which falls woefully short relative to both last year's fiscal Q2 and sequentially.
Perhaps most painful, at least from a people perspective, was the inevitable news that BlackBerry would lay off approximately 4,500 employees, equal to about 40% of its workforce. Also, BlackBerry will trim its smartphone offerings from six models to four, and refocus its energies toward the commercial market. A nice thought, but with the proliferation of the "bring your own device" to work craze, even that doesn't inspire confidence.
Yet another blow
Considering its preliminary earnings news, not to mention its well-documented problems finding a buyer, the last thing BlackBerry needed was a hiccup of any kind. But that's exactly what happened shortly after making BBM available for free download to Android OS and iPhone users.
After an "unreleased version of the BBM for Android app" made its way online, over 1.1 million iPhone and Android users downloaded the apps in a mere eight hours, according to BlackBerry. That should have been cause for BlackBerry and its fans to celebrate the small win at a time when anything remotely positive is welcome. Alas, it was not to be.
Apparently, the BBM downloads were too much of a good thing. Later the same day, BlackBerry said all those downloads caused "issues" that it's is still trying to sort out. Consequently, iPhone users that already downloaded the BBM app can still utilize it, but those that didn't get the chance are out of luck for now. As for Android users, which account for 80% of the global smartphone OS users, not only are they unable to download BBM, those that did have had the apps disabled. Add in second-place Apple's 14% market share, and BBM just became unavailable again to nearly every smartphone owner in the world. Ouch.
Unfortunately, problems with BBM remain. Yesterday BlackBerry tweeted, "We will provide you an update on timing as soon as we can. Teams are working non-stop."
The timing of BlackBerry's latest miscue was poor. When good news, any good news, was needed, BlackBerry did what it had done so often in the recent past -- dropped the ball. BlackBerry's latest snafu could have been extremely costly for investors if the stock had continued its slide while waiting for a suitor.
A buyer had to be found for BlackBerry, and soon, because as the BBM problems demonstrated, BlackBerry was becoming less and less attractive with every passing day. The $9 a share deal offered by current BlackBerry shareholder Fairfax Financial to take BlackBerry private is already bemoaned by some as too little. After its recent earnings disaster and the problems with BBM, it's clear things were only going to get worse for BlackBerry shareholders, not better.
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The article Why BlackBerry Shareholders Should Cheer $4.7 Billion Deal With Fairfax originally appeared on Fool.com.Fool contributor Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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