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Instant View: Fairfax-led consortium offers $4.7 billion for Blackberry

(Reuters) - A consortium led by investor Prem Watsa's Fairfax Financial has offered to buy Blackberry Ltd for $4.7 billion, tossing the struggling Canadian smartphone maker a lifeline as it continues to bleed market share.

Commentary:

ELVIS PICARDO, STRATEGIST AND VICE PRESIDENT OF RESEARCH, GLOBAL SECURITIES

"They had their backs to the wall last week with the big job cuts and the writedown they took. This will help them to be out of the public eye and get things back in order before they hopefully come back into the market again.

"It's either a really cheap price for Fairfax or it still represents an overpayment for a company whose future is very much in doubt.

"I would think a competing buyout offer is quite unlikely. The miniscule premium and the muted market reaction is another indication that the market views the odds of a competing bid as slim."

JACK GOLD, GOLD ASSOCIATES

"This is probably the best possible outcome of several unattractive options for BlackBerry. Going private and potentially bringing back the founder of the company, Mike Lazaridis (as has been rumored) could buy them some time to put the house in order. They would be a much smaller player, but being private would mean that Wall Street is not continuously breathing down their neck.

"It would provide them with some financial stability so its enterprise customers would not feel compelled to replace them for fear of going out of business (even though the issue of decreasing sales and moving to other platforms is driving that direction with some significant energy).

"And it could provide them with cover to re-architect the company even more than they are now. Can BlackBerry ultimately survive? That's not as clear. But given 6 to 12 months of 'under the cover' ability to do what is needed, it could be a much more attractive acquisition target at the very least. And it would at least allow management to concentrate on the important aspects of restructuring, rather than spending massive amounts of time with the investment community.

"I don't believe that breaking up the company is the right way to go. I believe there is more value in keeping the three parts of the company (devices, services, and collaboration) intact, which works better for longer-term value. But BlackBerry still faces a huge mountain to climb to get back into the device marketplace, given the precipitous decline in sales.

"It may not be able to do so. It can monetize aspects of BlackBerry Messenger to become a profit center for the 60 million-plus users (and growing now that Android and iOS versions are being launched). This collaboration division is the biggest potential growth engine for BlackBerry. The services division ... also has some legs and could generate growth.

"The three divisions taken together could have synergies that could keep BlackBerry running as a viable concern. But it won't be easy. Negative press on its situation can sometimes be a self-fulfilling prophecy, and the market may not be kind to them even if they do provide innovative products and services (something they have been late doing in the past).

"So, with all the potential outcomes (sale, shutdown, breaking up) this is probably the best possible outcome for BB. Whether it's too little too late is yet to be seen."

MICHAEL SPRUNG, PRESIDENT, SPRUNG INVESTMENT MANAGEMENT

"It's certainly surprising that the offer has come so quickly after the preannouncement of the poor earnings. I think it remains to be seen how this is likely to play out. It has certainly given the company time to shop up for a higher bid here. One thing it will probably have accomplished is a higher floor price on the stock.

"The offer price is on the low side of the range that most people were expecting."

JAMES FAUCETTE, ANALYST, PACIFIC CREST

"If I was a Blackberry shareholder I would jump at it. They're actually entering into a period of relative stability. It's going to be hard to improve things going forward.

"If I'm BlackBerry, it's a good time to sell because my value is being propped up by relative stability in the service business. If the service revenue starts to decline at an accelerating rate its worth a lot less.

Faucette said BlackBerry service revenue will decline at an accelerating pace in the future, because its hardware business is expected to keep declining at its current rate.

"They're going to be hard-pressed to find a more willing buyer.

"BlackBerry itself is worth less than he's offering."

BRIAN COLELLO, ANALYST, MORNINGSTAR

"Based on the company's disastrous earnings warning on Friday, I think a deal had to happen and the sooner the better. This is probably the only out for investors and the most likely outcome.

"The benefit to this sort of takeover is the ability for BlackBerry and the consortium to reinvent the company without public scrutiny. So we won't see any of these warnings or earnings releases that do nothing but disappoint investors. The company can go ahead with its strategy, as it pleases, that's a positive.

"It appears that the end game is going to be whether BlackBerry can emerge as a niche supplier of highly-secured phones to enterprise customers and governments.

"There's $9-a-share price and $5 of $9 is cash on hand at this point, so we think this is a reasonable price to take over the company just based on cash on hand plus patents; although quite frankly, the market has spoken and that's all the company was really valued for anyway.

DANIEL ERNST, ANALYST, HUDSON SQUARE RESEARCH

"With what Prem Watsa has said in his position before, we've been expecting this.

"What's the right price? I guess it's a case of beauty is in the eyes of the beholder here. The tougher part will come for them, to right the ship.

"To a certain extent, the good news for BlackBerry enterprise customers should be that there's a financial backing here and they need not worry about the platform going away, at least not immediately.

"It's going to be very difficult to turn this around. What Blackberry was known for, with its best-in-class messaging system with better security, is not really true anymore. (Apple's) iOS delivers all of that and more companies have already figured how to do that in the cloud. So the cow has left the barn already.

"Based on Prem's prior commentary a year ago, when they probably should have sold, the board was not serious about taking on serious strategic options.

"They looked at all possibilities and the best possibility in the long term for the platform would be with a strategic buyer."

Larger players like Microsoft, Lenovo and others may have looked at it and "already passed."

COLIN GILLIS, ANALYST, BGC PARTNERS

"This is a take-under but at least they got one bid.

"This is a company that needs to go private if they have any chance. They'd be able to restructure outside of the public eye, take a long term view, and run the company at break even.

"It's better than being broken up into pieces.

"But this is conditional on financing. This is not a done deal. Anybody who's bidding this up thinking there'll be a bidding war, that may not materialize."

NEERAJ MONGA, ANALYST, VERITAS INVESTMENT RESEARCH

"What it means is that Blackberry shareholders should be happy, they should sell and take their money.

"In the short term, the Fairfax offer saves Blackberry the embarrassment of a public market flogging. The longer term, we'll have to see what happens."

(Reporting by John Tilak, Solarina Ho and Julie Gordon in Toronto, Malathi Nayak in San Francisco, and Sinead Carew in New York)

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