BlackBerry (BBRY) stock briefly rallied 10% early Friday to get into double-digits on talks that the company was open to going private.
But after the BlackBerry buyout sparked a quick pop to start the day, BBRY stock gave up most of those gains to move back below $10, tallying a roughly 18% loss since January 1.
Seems like nobody believes in BlackBerry stock on the rather unimpressive relaunch of its smartphones with the Z10 and Q10 devices. A BlackBerry buyout on the surface makes sense, because it would allow the company to regroup out of eyesight from the public markets … but frankly BBRY is doomed, either as a private company or a public company.
So investors who punched out during the early-day highs on Friday amid BlackBerry buyout rumors were right to get out while the getting was good.
Remember, BBRY was depending on its BlackBerrry Z10 and Q10 phones to bring the company up to the same plane as Apple (AAPL) and its iPhone and Samsung (SSNLF) and its Galaxy phones. That effort failed miserably, as evidenced by a surprise quarterly loss for BlackBerry stock at the end of June. BlackBerry 10 devices, including the Q10 and Z10, made up just 40% of the company’s smartphone shipments in the period.
So what do you think is going to happen in the second half of the year with an iPhone 5S or iPhone 6 likely to hit the market? Or as Google (GOOG) hopes to gain traction with its Moto X smartphone, the first homemade hardware offering since Google’s $12.5 billion Motorola Mobility acquisition?
BlackBerry bulls always point to the power of enterprise smartphone sales and the value of patents and security software features. But Microsoft (MSFT) continues to throw money at IT market share with its Windows Phone OS and Lumia partnership with Nokia (NOK). Nokia just reported sales of its Lumia phones almost doubled year-over-year to 7.4 million units last quarter, and inroads into BlackBerry’s old stomping grounds of enterprise sales have a big role in that growth.
Who do you think will win that war longer-term? Microsoft with its connections, desperation over mobile and $78 billion in cash and investments? Or a currently unprofitable BlackBerry?
I said it before and I’ll say it again: There is no hope for BlackBerry because consumers have abandoned the brand and other tech companies are gobbling up market share. Some enterprise spending will still go to BlackBerry, particularly overseas, but it’s naive to confuse this with the idea of growth.
A move to take BBRY private makes sense, since BlackBerry stock is struggling mightily in the public markets. Also, patent and software assets become less relevant in a fast-moving smartphone market and lose value every day. At least a BlackBerry buyout to take the company private would facilitate BBRY being carved up into parts before the parts are wholly worthless.
But still, I doubt any tech company like Hewlett-Packard (HPQ) or Microsoft (MSFT) would truly be OK with swallowing BBRY whole. And it would take a very shrewd private-equity fund to get a good enough price for the attractive elements to make a deal right now instead of in two years when continued declines will make BlackBerry even more desperate.
Make no bones about it … one way or another, BlackBerry stock will disappear.
Investors should take the BlackBerry buyout buzz as a sign to plot an exit strategy. Selling BlackBerry on a brief upswing like the one Friday could be the best decision regarding BBRY stock.
- More on why BlackBerry stock is not a buy … and why I think BBRY is doomed. (The Slant)
- Rocco Pendola wonders if Microsoft or Nokia may be buyers. (TheStreet)
- Silver Lake Partners, a private-equity group interested in buying Dell (DELL), was said to be in talks with BlackBerry. (Reuters)
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP.