BlackBerry is sitting on a cash pile of about $2.6 billion. That’s a good thing. However, All Things Digital is reporting that BlackBerry will burn through that cash in as little as 18 months:
Bernstein Research analyst Pierre Ferragu figures that BlackBerry will burn through most of its $2.6 billion in cash in the next 18 months, leaving it in a bad, bad way.
“Because the company is losing users at a very high pace, has a stretched working capital and massive off-balance-sheet commitments that will turn into cash burn in the next four quarters, we believe BlackBerry is likely to burn close to $2 billion in the next six quarters on a standalone basis,” Ferragu said in a note to clients. And that, he believes, will lead the company into material liquidity problems.
Worse, Ferragu thinks it will compromise Fairfax Financial’s $9-per-share deal to take BlackBerry private. Indeed, he feels that the Fairfax bid has almost no chance of success.
“We used to consider potential investors could buy BlackBerry’s equity with the hope to monetize some of its strategic assets and using the company’s cash position and IP portfolio to leverage the acquisition,” Ferragu said. “We now believe there is virtually no collateral for a bank loan and no credible story for a break up to justify more than a couple of billions for the equity.”
With that in mind, Ferragu downgraded BlackBerry’s stock to “underperform,” with a new price target of $4.50.
That’s pretty grim on a number of fronts. If it does affect any of the buyout scenarios on the table, then whatever value the company has will be reduced to patents and tech in a hurry. That’s not good if anyone was hoping that the company would be bought wholesale and managed as such.
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This entry was posted on October 7, 2013 at 9:36 am and is filed under Commentary with tags BlackBerry. You can follow any responses to this entry through the RSS 2.0 feed.
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BlackBerry Seen Burning Through Cash Reserves In 18 Months
BlackBerry is sitting on a cash pile of about $2.6 billion. That’s a good thing. However, All Things Digital is reporting that BlackBerry will burn through that cash in as little as 18 months:
Bernstein Research analyst Pierre Ferragu figures that BlackBerry will burn through most of its $2.6 billion in cash in the next 18 months, leaving it in a bad, bad way.
“Because the company is losing users at a very high pace, has a stretched working capital and massive off-balance-sheet commitments that will turn into cash burn in the next four quarters, we believe BlackBerry is likely to burn close to $2 billion in the next six quarters on a standalone basis,” Ferragu said in a note to clients. And that, he believes, will lead the company into material liquidity problems.
Worse, Ferragu thinks it will compromise Fairfax Financial’s $9-per-share deal to take BlackBerry private. Indeed, he feels that the Fairfax bid has almost no chance of success.
“We used to consider potential investors could buy BlackBerry’s equity with the hope to monetize some of its strategic assets and using the company’s cash position and IP portfolio to leverage the acquisition,” Ferragu said. “We now believe there is virtually no collateral for a bank loan and no credible story for a break up to justify more than a couple of billions for the equity.”
With that in mind, Ferragu downgraded BlackBerry’s stock to “underperform,” with a new price target of $4.50.
That’s pretty grim on a number of fronts. If it does affect any of the buyout scenarios on the table, then whatever value the company has will be reduced to patents and tech in a hurry. That’s not good if anyone was hoping that the company would be bought wholesale and managed as such.
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This entry was posted on October 7, 2013 at 9:36 am and is filed under Commentary with tags BlackBerry. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.