Don’t Be Fooled by Research In Motion Ltd (BBRY)’s Cheap Valuation

No buyers

With BlackBerry reporting dismal operating results, many analysts think the company could be worth more liquidated. But there’re a few problems with that theory.

Last year BlackBerry hired bankers from JPMorgan Chase & Co. (NYSE:JPM) and RBC to investigate the company’s strategic options – industry code for sell-out. But if a buyer didn’t swoop in at $6 per share it’s hard to see one coming in today with the company’s market share in free-fall and an eroding subscriber base.

Microsoft Corporation (NASDAQ:MSFT) is frequently mentioned as a possible buyer. The company was reportedly in talks to purchase Nokia Corporation (ADR) (NYSE:NOK)’s handset business earlier this year but the deal fell through on concerns about the company’s slumping market share. While Microsoft may still consider BlackBerry, a Nokia-Microsoft deal just makes more sense due to the two firms’ existing partnership in the handset business.

China’s Lenovo Group is also thrown around iBanking water coolers as a possible buyer. But it’s difficult to see the Canadian government approving the deal on security concerns – or just pride.

There’s an old saying on trading desks that a stock is only worth what someone else is willing to pay. If no one is willing to step in to buy Research In Motion Ltd (NASDAQ:BBRY)’s assets, what does that say about the company’s value. Without a breakup, BlackBerry will have to make it on its own as a handset manufacturer – which based on the last quarterly report isn’t going well.

Foolish bottom line

Don’t be fooled by BlackBerry’s cheap valuation. While it looks like you’re buying a dollar for fifty cents, that dollar comes with strings attached. There’s a real possibly your capital will be withered away over time.

The article Don’t Be Fooled by Blackberry’s Cheap Valuation originally appeared on Fool.com and is written by Robert Baillieul.

Robert Baillieul has no position in any stocks mentioned. The Motley Fool recommends Google. The Motley Fool owns shares of Google and Microsoft. Robert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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