BlackBerry Could Burn Through Most of Its Cash in Just Six Quarters
BlackBerry CEO Thorsten Heins said the foundering smartphone maker remains “a financially strong company.” But it may not be for much longer, according to an analysis of the company’s latest regulatory filing, made earlier this week.
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.
A grim prediction for a company already suffering through dire days. But one worth considering. Because, if Ferragu is right and it comes to pass, BlackBerry could find itself not only without a rescuer, but without an escape route.