Exclusive: Cisco, Google, SAP discussing BlackBerry bids - sources

NEW YORK/SAN FRANCISCO Fri Oct 4, 2013 9:35pm EDT

The company logo is see at the Blackberry campus in Waterloo, in this September 23, 2013 file photo. REUTERS/Mark Blinch/ Files

The company logo is see at the Blackberry campus in Waterloo, in this September 23, 2013 file photo.

Credit: Reuters/Mark Blinch/ Files

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NEW YORK/SAN FRANCISCO (Reuters) - 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 $4.7 billion, a bid which has faced some skepticism because of financing questions.

The company, based in Waterloo, Ontario, has asked for preliminary expressions of interest from potential strategic buyers, which also include Intel Corp and Asian companies LG and Samsung, by early next week.

It is unclear which parties will bid, if any. But the potential technology buyers have been especially interested in BlackBerry's secure server network and patent portfolio, although doubts about the assets' value remain an issue, the sources said.

Google, Intel, Cisco, LG and SAP declined to comment. Samsung was not immediately available for comment.

Possible bidders are proceeding with caution given the uncertainty around BlackBerry, which last month reported a quarterly loss of nearly $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 from this week 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 $3 billion to $4.5 billion; a collection of patents that could be worth $2 billion to $3 billion; and $3.1 billion in cash and investments.

Adding to the company's woes, it's likely to burn through almost $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.

In August, the company said it was weighing its options, which could include an outright sale, after Reuters first reported BlackBerry's board was warming up to the possibility of going private.

At that time, it formed a five-member special committee chaired by board director Timothy Dattels. Other members include Chairman Barbara Stymiest, Chief Executive Thorsten Heins, Richard Lynch and Bert Nordberg.

A spokesman for BlackBerry said in an emailed statement to Reuters: "The special committee, with the assistance of BlackBerry's independent financial and legal advisors, is conducting a robust and thorough review of strategic alternatives." He declined to provide further comment.

JPMorgan Chase & Co and RBC Capital Markets are advising BlackBerry. The board is being advised by Perella Weinberg Partners, the sources said. Skadden, Arps, Slate, Meagher & Flom LLP and Torys LLP are providing legal advice.

(Additional reporting by Alastair Sharp in Toronto and Alexei Oreskovic, Poornima Gupta and Noel Randewich in San Francisco; Editing by Christian Plumb and Prudence Crowther)

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Comments (5)
4lstewart wrote:
I don’t understand how a messaging system can be worth that much. A basic messaging system is easy to program, how hard is it to add your own security features!?!

This company seems like an overall flop to me. Everything is a copy and their operating system is archaic. Android is the only platform (i know there’s only like 2.5 to choose from) that seems to be creating NEW features these days.

Oct 05, 2013 7:35am EDT  --  Report as abuse
Joshbb wrote:
Please let google buy it! I so badly want an android powered Blackberry!

Oct 05, 2013 2:27pm EDT  --  Report as abuse
mapkom57 wrote:
“The value of BlackBerry’s patent portfolio and licensing agreements is likely to halve in the next 18 months, a company filing from this week shows, potentially limiting its attractiveness.”

Where do they get this from? Hey wait. I bet its from Footnote 5:

“Based on the carrying value of the identified intangible assets as at August 31, 2013 and assuming no subsequent impairment of the underlying assets, the annual amortization expense for the remainder of fiscal 2014 and each of the succeeding years is expected to be as follows: 2014 – $523 million; 2015 – $1,161 million; 2016 – $531 million; 2017 – $339 million; and 2018 – $271 million.”

This is a standard disclosure for amortizable intangible assets.

Seems like they plussed $523 and $1,161 and got $1,684. Then they compared it to the amortized cost on the books at 8/31 of $3,505 and they concluded the ‘value will be halved’. The question is : what the hell does amortized cost have to do with “value”?

Oct 05, 2013 8:16pm EDT  --  Report as abuse
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