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BlackBerry reels: Stock gored after shocking loss, BBM mishap Add to ...

These are stories Report on Business is following Monday, Sept. 23, 2013.

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BlackBerry reels
Shares of BlackBerry Ltd. tanked again today, after investors had the weekend to digest an earnings shock, a mishap with its rollout of the BBM app for rival smartphones, and further speculation and revelations surrounding the embattled company.

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Over the course of two days, its stock has been gored, down by almost 6 per cent by midday today after Friday's meltdown.

“The results clear the way for a buyer to get a material discount on BlackBerry's assets,” said analyst Todd Coupland of CIBC World Markets. referring to BlackBerry's pre-announced second-quarter results Friday.

“We believe the best method to determine a bid price is via a sum of the parts. We value the business at $20/share, while discounting material portions of the business gets us to $12.”

To recap the last three days:

As The Globe and Mail’s Omar El Akkad and Sean Silcoff report, BlackBerry shocked investors Friday afternoon as it warned of a second-quarter loss of almost $1-billion, largely related to a huge charge on unsold BB10 devices. It plans to slash 4,500 jobs, cut operating costs in half and retreat from much of the consumer market.

Over the course of the weekend, BlackBerry suffered a setback with the much-awaited introduction of the app for its popular BBM for Apple Inc. iPhones and devices running Google Inc.’s Android system.

BlackBerry said in its blog that an unreleased version of the messaging app for Android was posted online.

“The interest and enthusiasm we have seen already – more than 1.1 million active users in the first eight hours without even launching the official Android app – is incredible,” BlackBerry said on Saturday.

“Consequently, this unreleased version caused issues, which we have attempted to address throughout the day,” it added.

“Our teams continue to work around the clock to bring BBM to Android and iPhone, but only when it’s ready and we know it will live up to your expectations of BBM.

It paused the rollout, though those who downloaded the app for the iPhone were able to use it.

Also over the weekend, The Wall Street Journal reported that Mike Lazaridis, who founded what was then Research In Motion Ltd., may be planning to bring private equity players on board in a bid for the company. The New York Times added today that Mr. Lazaridis has approached the Blackstone Group and Carlyle Group, though talks are preliminary.

As if the earnings shock and BBM mishap weren’t enough, The Journal and The Financial Times are both reporting that BlackBerry bought a used corporate jet in July, in the midst of its troubles.

The Bombardier Global Express jet was to replace two older planes, the company said, and it now plans to sell its fleet altogether.

A BlackBerry spokesman was not immediately available to comment, but told other news organizations that it had originally planned to buy two older Dassault aircraft in favour of the Bombardier jet.

“In light of the company’s current business condition, the company has decided to sell that aircraft along with the two legacy aircraft and will no longer own any planes,” the company said.

Analysts are, of course, taking a dim view of BlackBerry, which is in the midst of an auction for all or part of the company, in the wake of Friday’s announcement.

“We have been steadfast in our position that BlackBerry should downsize and focus on the enterprise, a strategy the company will now pursue,” said analyst Kris Thompson of National Bank, who cut his price target on the stock to $5 from $8.

“Our view now is that any recovery is very unlikely.”

Analyst Michael Walkley of CanaccordGenuity held his price target at $8, based on a “sum-of-parts analysis” of the company.

“We maintain our belief BlackBerry will ultimately end up selling the company due to the difficult competitive smartphone market and low probability BlackBerry 10 can return BlackBerry to sustained profitability, even despite the deep cost cuts,” he said.

Apple sets record
Amid BlackBerry’s troubles, Apple Inc. has set something of a milestone.

The tech giant said today it broke records with sales over three days of 9 million of its new iPhone 5S and 5C, sending its stock climbing.

As well, it said, more than 200 million devices are now running on the new iOS7 operating system released last week.

The sales figures are, of course, a good sign for Apple amid questions over its ability to still lead the way in mobile innovation and amid competition from Samsung, whose Galaxy is popular, and phones running the wildly popular Android system from Google Inc.

“The demand for the new iPhones has been incredible, and while we’ve sold out of our initial supply of iPhone 5S, stores continue to receive new iPhone shipments regularly,” said chief executive officer Tim Cook.

Given that, Apple also said that fourth-quarter revenue would be near the top end of its projection of between $34-billion and $37-billion.

Foreign players to stay out of auction
No foreign telecom carriers plan to participate in the Canadian government’s upcoming auction of wireless spectrum, but two private-equity firms, Birch Hill Equity Partners Management Inc. and The Catalyst Capital Group Inc., have signed up to bid, The Globe and Mail's Rita Trichur reports.

Industry Canada released its long-awaited list of applicants today before the open of financial markets. In total, 15 names appeared on the list, none seemingly associated with any large foreign telco.

Industry players have been anxious to know if any foreign telecom carriers applied after U.S.-based Verizon Communications Inc. nixed its plans for a Canadian expansion.

The stakes are high. The 700 megahertz frequency represents the most valuable air waves that have ever come up for auction and the outcome of this auction could shape the industry for the next 30 years.

Agrium warns on prices
Agrium Inc. is boosting its dividend by half even as it warns of a hit to its third quarter.

The Canadian agribusiness giant said today it plans to hike the dividend by $1 (U.S.) to $3, annualized, as part of its strategic review and amid “the strength in the long-term agriculture fundamentals and the benefits of our integrated model," The Globe and Mail's Bertrand Marotte reports.

It added, however, it expects “soft” nutrient prices and lower sales volume to hurt, with wholesale earnings before interest and taxes to fall by $200-million from a year earlier. Retail EBIT, though, is expected to top last year’s.

“Despite short-term headwinds for our wholesale business unit this quarter, the long term fundamentals of our business remain strong and we expect significant crop input demand as we move into the fall season,” said chief executive officer Mike Wilson.

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