BlackBerry stock is rising after a report in the Wall Street Journal that the U.S. private equity firm Cerberus Capital Management LP has expressed interest in the failing Waterloo, Ont.-based smartphone maker.
Cerberus, which is based in New York and specializes in distressed companies, is reported to have signed a confidentiality agreement that would allow it to access BlackBerry's private financial information.
BlackBerry stock closed at $8.26 in Toronto and $7.98 on the Nasdaq. The stock price spiked rapidly after the report was published. Earlier in the day, it had fallen by as much as four per cent on news that the cost of its restructuring efforts will be four times higher than anticipated and that it is looking to sell some of its real estate holdings.
The Toronto firm Fairfax Financial Holdings, which made a preliminary offer for BlackBerry of $4.7 billion last month, has until this week to deliver an initial draft of a merger agreement.
The company, which is one of BlackBerry's biggest shareholders and is headed by former BlackBerry board member Prem Watsa, has until Nov. 4 to secure financing and conduct due diligence on the preliminary offer, during which time BlackBerry is free to seek other buyers.
BlackBerry's stock had been driven down earlier this week amid reports the Fairfax offer overvalued BlackBerry at $9 a share. Analysts suggested the company might be worth more in the region of $7 a share.
BlackBerry real estate may be sold
It also emerged Wednesday that BlackBerry is reportedly considering selling some of its real estate in Waterloo as it struggles to restructure the failing company, shrinking its workforce and looking for ways to extract value from its operations.
The Globe and Mail reported that BlackBerry has asked real estate firms to suggest ways of tapping the value of about 20 properties the company owns in the Waterloo area.
The newspaper's sources said BlackBerry has asked for ideas that would generate the largest possible return from its real estate in as little time as possible, through a confidential process begun last week.
In an emailed statement to CBC News, BlackBerry said it evaluates its real estate on an ongoing basis to "ensure the company is optimizing resources."
"As we work to our target of reducing expenditures by approximately 50 per cent over the next three quarters, that includes optimizing our space," the statement said. "Should space become unnecessary for BlackBerry's continued use, we will work with key partners in the community who may need some of our surplus space."
Restructuring to cost $400M
BlackBerry is in the process of restructuring and announced last month that it would eliminate 4,500 jobs, about 40 per cent of its global workforce. It is not clear how many of those jobs are in Waterloo region. BlackBerry has said only that the layoffs will affect "all facets of the company."
According to financial documents filed with regulators, BlackBerry expects to have $400 million US in charges on the books before the end of May 2014 related to the cost of layoffs, the reworking of its smartphone lineup and other changes to its manufacturing, sales and marketing operations.
That's four times more than what it reported earlier this year, when it said it would likely book $100 million in charges through its 2014 fiscal year as it cut back staff and reduced other costs. Since then, the company's financial results have weakened, mostly on poor sales of its BlackBerry Z10 touchscreen phones.
The company announced on Sept. 23 it had signed a conditional letter of intent outlining a deal that would see it bought by a consortium led by Fairfax.
Soon after, it reported a second-quarter loss of $965 million and revenues of $1.6 billion, a decline of 45 per cent from the same period last year.
BlackBerry said it had 3.7 million smartphone sales on the books in the second quarter, a drop of 74 per cent from the 14.5 million it sold in its best quarter ever, almost three years ago. But it said if all phones that were shipped in the second quarter — but could not be officially counted as sales until they are sold through to customers — are counted, sales totalled 5.9 million.
Some assets already on auction block
The documents filed with regulators give a clearer indication of BlackBerry's financial situation and what it's doing to try to stem the losses.
In the documents. BlackBerry disclosed that it has marked certain unnamed assets as "redundant" and some have already hit the auction block, including properties, as well as plants and equipment, though the company did not identify anything specific.
For the second quarter, BlackBerry said it booked a loss of $7 million related to the declining value of those assets.
While BlackBerry stopped providing specific data for its subscriber base earlier this year, saying that it no longer accurately reflects its business model, the company said "customers" continued to decline in the second quarter in every region except the Asian-Pacific market.
In its outlook, the company said monthly service revenues are expected to decline further in the third quarter, though not at the escalated rate experienced in the second quarter. The company said service revenue dropped about 27 per cent to $724 million in the three months ended Aug. 31.
It expects service revenues to fall another 12 per cent in the third quarter.