Don't Count BlackBerry Out

 | Nov 04, 2013 | 10:11 AM EST  | Comments
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BlackBerry (BBRY), formerly known as Research In Motion, has been a headline grabber for months now. Management has changed without any success. Most recently, the company's largest shareholder, Fairfax Financial, agreed to a sort-of-stalking-horse bid to buy the whole company for $9 a share. Today, we find out that Blackberry is no longer for sale.

As you might expect, shares cratered on the news and are down by more than 15%.

But the sale wasn't abandoned because investors became skittish. Instead, BlackBerry announced that it was again replacing the CEO, along with a $1 billion convertible debt investment by several institutional investors. Fairfax will come in for $250 million.

BlackBerry is an intriguing stock to say the least. Once the pioneer in the smartphone market, the company has become an afterthought in the personal handset space. It also appears that business smartphone use may be questionable. But these are some smart folks stepping up to the plate. Of course, they are lending money to Blackberry with the additional option of equity conversation if the company can be turned around.

I believe it can as long as the new plan focuses on what BlackBerry is good at and not a turnaround attempt to try and go toe to toe with Apple (AAPL), Samsung or Google (GOOG). It's likely that Blackberry's focus will be on its core commercial segment and secure enterprise networks where it still has a very viable business.

And unlike many turnarounds, BlackBerry also possesses one the best ingredients to ensure success: time. Blackberry has a debt-free balance sheet. Even the $1 billion convertible note won't compromise the balance sheet -- at least not for a while. With the share price decline to around $6.50 today, each share comes with more than $4 in cash. That's a very healthy starting point for any talented CEO to come in and create a real turnaround or ultimately another shareholder-value-creating transaction.

I would keep a close eye on this company. The interest is still there. But this is a tech turnaround and those can be some of the most difficult endeavors to achieve. Still, about 10 years ago another company was wasting away until it discovered iTunes and we know what happened there.

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