BlackBerry is impossible to value right now

BlackBerry Private

The news about BlackBerry possibly becoming a privately held company thrilled Wall Street on Friday the morning, but by 11:15 a.m., BlackBerry’s gains had dwindled to 4.6%. The challenge of valuing the company right now is immense. We know that Q10 and Z10 sales were disappointing in the May quarter. Considering how long BlackBerry loyalists had waited for the new OS, tepid spring sales were a major disappointment. But we don’t know how well a sub-$300 BlackBerry smartphone with the new software would sell. Since the company is rapidly becoming almost entirely dependent on sales in Africa, Middle East and South-East Asia, it is possible that a budget BlackBerry could be a substantial hit. If BlackBerry ever launches one. The company’s future is riding on that question — and we don’t know when we’ll finally have an answer.

How do you value a smartphone company that has demonstrated notable weakness in the high-end segment but has not launched a new budget device with an up-to-date OS, literally in years? Any buyer would be truly flying blind.

Are there any examples of a handset company that went into a deep market share decline and then recovered and became a solidly profitable company? That is debatable. Sony’s merger with Ericsson resulted in a brief renaissance in mid-2000s, but it really was an Indian summer and soon the joint venture was hemorrhaging cash again. LG’s handset unit kind of fell apart in 2011, but the company has staged a comeback in 2013.

But LG smartphones enjoy massive support of a major conglomerate with considerable R&D resources to lend to its handset division. BlackBerry has to shoulder the weight of maintaining an operating system and an application ecosystem on its own.

Based on its current model portfolio, BlackBerry has no future — but it’s possible that a nifty budget device coming out in the next couple quarters could give the platform a new lease on life in emerging markets. Building a valuation model on this hypothetical scenario cannot be done without depending on a hefty dollop of science fiction.

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