Fairfax Financial is run by Prem Watsa, a cautious, methodical, "value" investor who has compounded Fairfax's book value by nearly 23%/year over the past 27 years.[1] (Fairfax's stock price has gained 19%/year over the same three-decade period.) His approach and track record are similar to those of Warren Buffett earlier in his career -- i.e., not someone one should normally bet against.
If Fairfax is offering to pay $4.7 billion to acquire RIM, Mr. Watsa somehow must have convinced himself that the value of RIM's business exceeds $4.7 billion by a large margin.
However, to me Blackberry looks like a dying platform suffering from anti-network effects (that is, fewer and fewer people use it, so fewer and fewer people want or need to use it). I don't understand how he gets comfortable with that number.
I'm a value investor myself and was seriously considering buying into this stock if it dipped any further. The thesis for investment is pretty darn clear at this point: Blackberry is trading at levels significantly below asset value and below the amount you'd get from tearing down the company
The balance sheet numbers per share:
1) +$13.50 - Net current assets (i.e liquid assets)
2) +$2.50 - Real estate holding (less liquid)
3) +$6.50 - Book value of IP
4) -$7.00 - TOTAL Liabilities
Meaning if you shut down the company you could realize a value of around $16 per share. Even if you discount current assets & IP since they might be over-valued in the books you can realistically get to a $11-$14 range for the value of the stock.
Essentially this means that any smart owner could realize a significant profit at $9/share just tearing down the company smartly (i.e. not a fire sale). As such, I expect Fairfax:
1) Maintain the businesses that are profitable TODAY
2) Shut down the unprofitable parts of the business that are destroying earnings (and thus slowly eating into asset value and the investment thesis)
3) Shop out ownership / licensing of the IP given it's significant value
I don't think this means that Fairfax is trying to turn around the company and restore Blackberry to its earlier glory; that would be a bit irresponsible and reckless for a value investor. Don't expect Blackberry to be the same company it was before, although I expect parts of business to continue.
Interesting analysis. There is another analysis from Quartz: 0 for phone business, 1.2 billion for BBM and enterprise infrastructure, 2.8b cash, 1b for patent portfolio.
I'd like to caution that this analysis is incredibly flawed. Specifically it magically ignores the entire liabilities side of the balance sheet (when you buy a company you don't just inherit their cash balances but also their debts). This is the problem with most financial journalism; you shouldn't taking financial advice from someone who doesn't understand the income statement or balance sheet.
All I did was take the balance sheet and pull out intangible assets: https://www.google.com/finance?q=NASDAQ%3ABBRY&fstype=ii&ei=.... I did NOT consider the value of earnings from any of the business (i.e. income sheet) as the investment thesis I made was for shutting down the business, and I don't want to divine profitability from each of the business lines.
They really need to require finance coursework in college so this kind of fake financial journalism gets stamped out.
slykat: I'm looking at asset liquidation value too, but my conclusions are different from yours. According to the June 1, 2014 financial statements[1]:
* Cash, short-term and long-term liquid investments, receivables, and assets held for sale totaled $6.0 billion. (I wouldn't dare put a dollar value on inventories, because their value declines at an accelerating pace, like a waterfall, due to the rapid pace of technological change.)
* Property plant & equipment (consisting mostly of land and buildings) totals $2.2 billion. Let's give them full credit for this figure.
* Total liabilities are $3.7 billion.
So, assuming you can liquidate the whole business quickly, the liquidation value of all tangible assets appears to be somewhere around $6.0 + $2.2 - $3.7 = $4.5 billion. However, the company is hemorrhaging money by the day and suffering from anti-network effects that can make revenues drop like a waterfall (instead of declining in a gentle slope), so this estimate may be optimistic. In a year, the figure could very well be down to $3.5 billion.
That leaves the value of intellectual property, carried on the books at $3.5 billion. Of that amount, $0.8 billion is the price paid for Blackberry's share of the Nortel patents[2]; the reminder consists primarily of all the Blackberry software they've developed in-house (that is, their proprietary OS and applications, built on top of QNX), which is valuable to third parties only to the extent they want to build a business around it. My (conservative) guess: this is worth a LOT less than $3.5 billion -- maybe ~$1 billion -- but I don't know for sure.[3]
At a proposed purchase price of $4.7 billion, the margin of safety looks very slim to me.
[3] For reference, QNX -- the jewel in Blackberry's software portfolio -- has been sold twice over the past decade. Harman International bought it for $138 million in 1994, and then sold it to RIM for $200 million in 2010. These figures are rounding errors compared to $4.7 billion. Source: http://blog.vdcresearch.com/embedded_sw/2010/04/update-2-rim...
Glad to see someone actually looked into the balance sheet before discussing valuation! To be fair I didn't do a detailed analysis into their books - I just skimmed over their balance sheet.
Nevertheless here's where I think we disagree:
* Inventory will have some liquidation value. Let's discount inventory by 75% which is pretty conservative; you will still get $200M here
* IP - Main disagreement for me is here. Most analysts who have pegged the IP at $2 - $3 bn. Let's put it at $2bn, the lower end of the spectrum [1][2]
As we can see the main question is the value of the IP (and PPE to a lesser extent). I have absolutely no experience valuing patents, I'm not a patent lawyer, and definitely won't be evaluating their 9K+ patent applications. So unfortunately there's a pretty big unknown in the valuation.
Regardless we have a $4.7B - $6.7B range based on a very quick 15 minute analysis of their balance sheet with an upside of earnings of any profitable lines of business that can be operated independently (if they exist).
My guess is tha Prem Watsa, as former chairman of BBRY, has done a much more rigorous evaluation of their IP and found profitable business lines he wants to keep / spin-off to reach a comfortable margin of safety.
The value of IP isn't the only question. We also seem to disagree on how quickly value is evaporating! Blackberry sales are bound to decline faster and faster, like a waterfall -- similar to what happened to Nokia's smartphones.
After the introduction of iOS and Android in 2007-2008, Nokia's quarterly smartphone unit sales barely budged... at first... but then dropped by two-thirds between Q1 2010 and Q1 2012![1]
Liquidating a company of Blackberry's size would take at least two years. Any estimate of liquidation value should take into account the possibility of quarterly unit sales dropping by two-thirds in the near future.
Take it private, do another, more aggressive round of layoffs and get down to a very core group. Then decide whether to chop it up and sell it off (patents alone are probably worth a good chunk of money). As far as I know, Blackberry has no debt, so that makes the math a bit easier.
As I put it elsewhere, there's not $4.7B of meat on the corpse. And that seems against the grain of a growth-oriented fund. That's the sort of thing that old-school junk bond funds would do to buy up and part out factories, inventory, and pension funds.
The only justifications I can think of for buying Blackberry are a: to rebuild them, b: to integrate their good tech into an existing system (a good play for an also-ran smart phone that wants more market share and is willing to gamble for Blackberry's old, loyal enterprise market), c: to deliberately put them out of business (a good play for a successful smart phone to either go after the vacuum created by their death, or prevent competitors from exercising plan B).
Just extrapolating from http://finance.yahoo.com/q?s=BBRY rather than digging in to financial statements: Blackberry has $10 billion in annual sales while losing $200 million.
Is it such a stretch to imagine a buyer killing R&D and investment, and marketing the carcass for enough years of free cash flow to get back the $4.7 billion?
Value investors aren't necessarily growth investors. The margin of error they look for can come from a cheap price.
Blackberry has rapidly declining sales (-50% in 2 years)... you'd have to hope to not just cut costs, but cut them faster (and repeatedly) to stay ahead of the current decline in sales. And you'd have to expect that decline to accelerate if you're cutting back on R&D (and probably facing general brain drain - why would a good mobile engineer keep working for a company in obvious wind-down? Nobody likes to work on an EOL platform.)
That works if it's a factory. It doesn't work that well in a mobile device manufacturer. Anyone selling wireless devices is subject to ongoing changes in the regulatory environment, plus security threats. If they don't have a team better than what you get by paying "just enough", bitrot will set in within a year.
AOL has an ongoing cash flow from subscription payments. Those payments keep coming from customers until they either quit the service or die off.
Blackberry sells devices. They don't have significant recurring revenue streams - customers have to come back and re-up to a new device every 2-3 years, or they don't get any money. That means as soon as you're no longer offering a competitive product, the revenue stream can dry up very quickly. Especially if carriers and retailers decide you're no longer worth carrying.
Look at the 50% drop they've taken in the past two years. Even if that line just stays constant, you're talking about a decrease of 90% in 6 years total. It's rare than you can scale a tech business down 90% or more and still operate it in any reasonable fashion.
This might be where his knowledge of the company comes from:
"On January 22, 2012, it was reported he was to be appointed to BlackBerry handset maker, Research In Motion Ltd. (RIM), board of directors in the company's largest ever corporate shakeup. Mr Watsa resigned in August 2013, but kept his investment in the company at the time."
At the end of the last quarter, the company's book value was $9.4 billion. Even if you leave out intangibles (like patents, which everyone seems to agree is worth something), the value was $5.9 billion. I think the value proposition is easy to see. Heck, current assets minus all liabilities was $3.4 billion which means that they are valuing the patents and buildings at about $1.3 billion (perhaps a bit more if you factor in this quarter's losses). It might be better for shareholders to wind the company down, and pay out the cash as dividends.
Value investors don't share the founder's shame in riding the revenues of the installed base. Many software firms find home with private equity firms that are happy to cut R&D and Marketing, and live off of services revenue. I could see Blackberry going down this path.
What has not been mentioned how curious the timing of this offer has been.
BBRY just did a massive writedown basically valuing all their newest phone inventory at $0. BBRY also changed the way they record sales so it looks like they have a bigger sales drop than they really did(they still had a very bad drop).
To have all these bad news and then for Watsa make what is effectively an insider bid for a company after participating in such negative news(resigning from the BBRY board a few weeks earlier does not count), smacks of something "unethical".
Why didn't he make a $12 bid a few days earlier? It is obvious Watsa knew the bad news and could make an informed bid.
A lot of regular investors are feeling extremely hurt by this. If I had invested in BBRY at say $10 hoping for a longer term turnaround, I would be upset as well.
To a regular investor it looks like the big boys not playing fair. Not that life is fair or anything.
Could the anti-network effect be addressed by targeting niche markets? A renewed focus on Enterprise, for example, or a marketing strategy that paints them as a "premium" consumer choice.
I definitely agree with this. With all these multi-featured & difficult to secure smartphones out there, we definitely have an untapped market in enterprise-secure smartphones in the same way box.com is the enterprise-version[1] of dropbox.com.
1. Note I'm avoiding the argument about what makes dropbox less secure than box.com. I have no idea, but somehow box.com is making money. The company I work for mandated box.com over dropbox citing "security concerns". Whatever the reason/mindset exists that concludes dropbox is less secure than https://www.box.com/enterprise/ , is the same mindset that would buy "enterprise-secure" smartphone over whatever trendy iOS/Android phone is available.
I can't get to box.com myself to see if it's any different, but I do know that dropbox has full access to files you store on their servers. That's an automatic red flag for a lot of companies.
They have a lot of cash, no debt. Qnx finally has a beautifull gui. Still have contracts with chrysler group. Bunch of buildings, patents, and huge upside. If they can license Nokia maps, now that Nokia HW is out of the picture, bb10 will have satisfied my last complaint.
Probably through patents. Sell those to highest bidding troll, then layoff to a very small core of the remaining interesting engineers with a brain and sell those to Google or Microsoft as an aquihire.
No, as of June 1 the company had $2.8B of cash, cash equivalents AND short-term investments (liquid securities). There's an additional $2.5B of accounts receivable on the balance sheet.
You are correct that BBRY has $3.4B of current liabilities.
Fairfax first invested in RIM back in 2010 and they've been adding to that position ever since. Their 10% stake was purchased at an average price of $17. He's been in the red on this investment for a while. I think this purchase is more about trying to turn the company around and try to recoup whatever they can. What JonFish85 posted is probably what's going to happen here.
> Take it private, do another, more aggressive round of layoffs and get down to a very core group. Then decide whether to chop it up and sell it off (patents alone are probably worth a good chunk of money). As far as I know, Blackberry has no debt, so that makes the math a bit easier.
Watsa is a great investor with a solid track record, but I think this has been a mistake for him.
Fairfax Financial Holdings (TSX: FFH) is an $8.3 billion property and casualty insurance company. They are an acquisitive bunch, having spent $4.7 billion on deals since 2011 (37% of their enterprise value as of 30 June 2013 or 57% of their market capitalisation as of today). All their acquisitions since 1997 have been in the banking, insurance or shipping/transportation spaces, with the exceptions of EFI Global (environmental services).
Their CEO, Prem Watsa, is a value investor. Fairfax's IRR is around 20% - this means Blackberry needs to yield about $840 million in cash a year to tread water. That seems unlikely. Instead, I think we will see a spin-off of the handset business and patent portfolio with a retention of the cash-flow generating service business.
What's the service business worth? It made $3.2 billion annualised the last quarter (Q2 FY 2014), $3.9 billion in FY 2013, and $4.1 billion in FY 2012. Let's assume it keeps declining at 8% a year. Let's further assume it can return at least the entire company's FY 2013 40% gross margin. Guess what 40% of $2.9 billion declining at 8% annually and discounted at 20% is worth over the next 10 years? $4.7 billion. Thus, if decline can be maintained at no more than 8% while margins are maintained at 40% and the cost of capital capped at 20%, the handset business, patent portfolio, and any terminal value after 2023 are freebies.
I worked at another Canadian company called Corel back in 2002 that went through a similar takeover. Company with a large cash position relative to the take over price, taken private by a Fund with the intention of being taken public again in a few years after costs were under control.
If that experience was any indication of whats to come then life at BBRY is about to become atlot less fun.
When a fund comes in they have a window for which they want to see a return( ie go public again or sell). In such cases any expense that can't be directly traced to adding to the bottom line will be mercilessly cut.
Good by Friday afternoon beers, employee sports teams, Christmas parties, bonuses, T-Shirts, etc.
The MO for takeovers like this is similar to a house flipper, they aren't looking to do the right thing for the long term, they'd rather do what can be done to make things look good for the next 2-3 years.
They understand( or believe) that employees will stick around in the short term( and put up with this stuff) if they believe an IPO is only a few years away.
As someone who sits on the other side of the table now at a fund, I've seen it happen from both sides now.
> Good by Friday afternoon beers, employee sports teams, Christmas parties, bonuses, T-Shirts, etc.
Considering they lost $1,000,000 in the last 90 days I would assume it hasn't been a very fun place to work at in a while. Maybe you could ask one of the 4,500 people they just laid off?
"Tentatively sold" is the worst description ever for what is really happening.
BB has just received an offer, the board has now approved this, but needs to advise shareholders if this is a fair or not offer, dd is pending, and shareholders have to decide yes/nor by tendering their shares... add to that to the possibility of more offers being made, making this entire thing last months (a la Dell et al).
It should be noted Fairfax holds 10% of BBRY shares (http://finance.yahoo.com/q/mh?s=BBRY), which means this to be taken a little more seriously than a 3rd party unsolicited bid.
Ugh. I know Fairfax VERY well. Prem Watsa is often called Warren Buffett of the North, and he may very well be. He's a great investor, and has done VERY well in investing the float of their insurance business. But, BUT, I think he's way in over his head here. Buffett himself will not touch technology companies, or businesses he doesn't understand. He has also said the technology world is way too competitive, and that there is hardly a "moat" that can protect a business from competition, etc... I don't understand why Prem is going after Blackberry. It is clearly in one of the most competitive spaces in technology, and there is no good crystal ball to see what the future holds. I mean, for every Apple, there are lots of companies like US Robotics.
It is why I shy away from technology companies with my investments.
If you do the math assuming Apple make's $400 a phone which may or may not be true, and the 9 million figure is correct. Then they made $3.6B however they probably made another 1B from accessories, warranties, apps, etc. So yah they probably did.
They account for it over time ("subscription accounting), but I believe get it all at once. It's goofiness required for GAAP accounting IIRC. This is why carriers often post lousy numbers after a big launch even though it means a lot of future revenue--those $350 subsidies add up quickly.
That's pretty wacky. So from an accounting perspective, the money just disappears for a while? If the phone companies have to post the loss immediately but Apple posts the earnings over time....
Not saying you're wrong. The world of accounting is just odd sometimes.
It doesn't disappear, it's noted, but just not counted as received. It is wacky, but makes some amount of sense and makes revenue more even. It helps lessen the incentive to stack a quarter with revenue even though it starves the next quarter (someone else's problem).
It seems to relate with software updates being assumed:
> Based on research into what allowed this to happened, the Sarbanes-Oxley Act was instituted to require certain minimum standards of financial accountability. Among its many rules is a provision that states that companies can't immediately book revenue for a product if the complete product has not yet been fully delivered.
The lowest-cost iPhone launched over the weekend is $549. So they likely didn't make as little as $400 in revenue on any new iPhone unit over the weekend. We don't know the aggregate carrier discount, but we do know that 1) the historical average ASP for iPhones is over $600, and 2) the just-launched lineup is roughly the same price as last year.
Less all expenses to launch, design, develop, manufacture, ship the current phones, they are at a good pace of getting a return on their investment. Don't look at it too linearly.
The fluctuation in market cap does not provide or withdraw financing from the company. The rise and fall of their shares is irrelevant and means that investors anticipate higher earnings and have therefore revalued the company. I don't see what you're getting at.
Citation? I've heard that QNX is used in something like ~70% of automotive touchscreen systems. So maybe Apple just ported Cocoa to an existing QNX system? I kind of doubt it, but I would be very interested to read more.
Can't give you due to [...] (feel free to interpret that :)).
Not sure which one is harder: port just Cocoa (or even a minimum subset of Cocoa [or just the icons/layouts], the demo/screenshot doesn't look as rich as the total package of the latest iOS and it's still in the work) or retrofit iOS for cars?
“We’re trying to make sure it remains in whole in Canada"
that is not a business reason
"we have every confidence it will be successful again,”
based on?
"There are no strategic players, or other technology firms, in the consortium."
so... a bunch of non technical players want to try and save a dying tech company for emotional reasons?
unless I'm missing something it might seem like a good idea to run away from that deal and fairfax at a pretty good speed.
i mean blackbeerry just announced hilarious losses for q2, dropped 4500 staff and just announced "pulling out of the consumer market to focus on enterprise"... it seems they are deeply failing to learn from the lessons of the iphone 7 years ago now. they always were a more enterprise phone and that was still not enough to save them from being cannibalized first from iphone and now android. hell even now windows phones makes better sense because it will tie in with your windows outlook, etc infrastructure better in your standard microsoft office.
Number one thing you're missing is the fact that you're reading a press release, not the internal business case for the bid. If they put in a solid, well-argued business case for why and how it's actually worth $6bln, there will be a long line of competing bids all the way up to that value, the share price will soar etc. The emotional lines plays very well in the press and distracts people like you from the possibility that they have a rock-solid business case (even if that business case is fire everybody and sell the patents to overseas patent trolls).
Or it might just be purely emotional, you never know :)
All they're really saying is that they want to maintain control without outsiders. And to really do that, they have to convert the company back into a private one, cut their losses by removing the deadweight in the 4500 employees, then stick to a core business that they know will keep them alive.
They should do infrastructure, and high-end Android phones aimed squarely at execs. Qnx is great, but the eco-system is in Android, BlackBerry should make the switch.
Their hardware is great, they could bring their UI and apps with them, enter Google's ecosystem and sell a bunch of gold-plated, physical keyboard equipped Android phones...
I think switching to Android would be a disaster. "Just another Android phone" is something we see already in the market, with very few players actually differentiating themselves.
Agreed. Secure infrastructure would be important. I see it as the most important component given that so many companies are switching their infrastructure to support BYOD instead of tying themselves directly to BB, Windows Phone, etc.
Hopefully this means that BlackBerry will survive in some form and have a future. Their recent phones and version 10 OS have a lot of merit, and I enjoy using and developing for them.
This deal is not a death knell for BlackBerry by any stretch. I'm from Waterloo and I can tell you that the general impression from the town and the people working there is very positive – they're free from the pressures of quarterly earnings calls to regroup.
"I'm from Waterloo and I can tell you that the general impression from the town and the people working there is very positive"
If your definition of positive is the same condition that afflicts the posters & commenters on Crackberry.com, I think a more appropriate word would be "delusional." They've been positive & upbeat all along during BBRY's spiraling death march.
With all due respect, I've yet to read ONE story out of Canada about Blackberry that was not plagued by misplaced sentimentalism, or economic nationalism. Just a couple days ago, I was mesmerized to watch a very somber Peter Mansbridge interrogate his panel of journalists aboutwhat RIM's demise meant for Canadian identity....crazy stuff.
I'm referring specifically to the University and startup scene around here. If anything, it's the opposite – they've been absolutely cynical the last few years. I don't think you'll find a higher concentration of "rim job" jokes anywhere than UWaterloo.
Don't get me wrong, we are _rooting_ for them. A lot of us bought stock years ago and they're very generous with the city and University, but this is basically the first perceived "good news" about RIM in years.
The Canadian press has been beating Blackberry up since the first round of delays leading up to the BB10 release. The Globe and Mail, CBC, National Post and The Star have all turned on them, and continue to be pessimistic while covering today's news.
There is however some delusion among some Canadians that good vibes and loyal patronage can keep BB afloat.
The bid is US$9 per share, but it traded at $10.50 around the announcement?[0] Are they really going to get away with paying below last marked price...
Well the announcement you are referring to is the layoffs and quarterly losses and not the letter of intent.
This news solidified what the street thought about Blackberry's recent BB10 sales. Its sort of like saying this house was worth 1 million before the fire. How can someone get away with paying on 300,000 for it now that its been burned to the ground.
The answer is that given the new news( poor sales, layoffs, write downs of inventory, etc) that BB is no longer worth 10.50/share.
So to answer you question, yes they probably will get that price.
It was selling for $8.26 this morning--the drop you're seeing is from last week after they announced they lost $1,000,000 over the previous 90 days and were laying off 4,500 people. The buyout announcement is what provided the small boost this afternoon.
I really hope this is not a front for a patent troll. I know 4.7B is a lot for a patent troll to spend but the most valuable assets BB holds right now are its patents. A tech player is not going to (rather should not) buy BB because a negative momentum is much more dangerous than a non-existent one.
Google Fairfax and Prem Watsa. He is sort of like Canada's Warren Buffett and a large existing BBRY shareholder. Not saying he won't monetize their IP portfolio, but it's not a front for a patent troll.
Irregardless of this deal...I'm still skeptical of where BlackBerry goes from here. They said they are out of the consumer handset market yet the consumer handsets were what gave BlackBerry those huge revenues/profits.
The corporate-only strategy I read about seems like if even successful would be much smaller in scope. There seems to be no real idea of what BlackBerry has to offer anymore??
I hope this works out well for everyone involved. I also hope that Fairfax leaves Blackberry alone if the deal goes through. I say this judging ONLY by the state of Fairfax's website: http://www.fairfax.ca/
From the article: "In light of the company's current business condition, the company has decided to sell that aircraft along with the two legacy aircraft and will no longer own any planes."
They probably bought it before this slump. Jets take months to deliver.
The deal is not done as yet - there are "terms" to be discussed as well as 6 weeks of time. It only has a letter of intent from Fairfax in which shareholders would receive $9 per share in cash.
very interesting move. i currently have both a blackberry for personal and work (yeah, one of those guys). i am converting the personal blackberry to an iphone, and the work to the q10. the iphone arrives tomorrow. i've been waiting a month for the q10. i still have high hopes for the q10 device but the only thing i get out of blackberry is the keyboard, and cloud synching of notes from the device on an enterprise account. i don't think it's enough.
Crap. I was hoping for an investor that actually had some kind of real plan, some technical synergy they could offer... Facebook or Sony or Canonical or something.
I started working at an insurance company (my second real job) 6 mos ago. Insurance companies are banks but instead of getting money to invest from depositors, it comes from businesses and individuals who hold policies.
A population of policy holders is predictable most of the time. You take the money that you know you won't have to pay out and you invest it.
Warren Buffet's money comes from Geico etc. That's why they advertise so much. The operations of Geico do not return fast enough to justify that marketing spend. Warren Buffet's portfolio of businesses, on the other hand, return handsomely.
A good sized fraction of the money of the people who see all those commercials gets funneled directly into GEICO's float and increases Buffet's leverage.
why not use their resources to help build the new Ubuntu Mobile phone that was on kick starter it would be a huge in demand project with a lot of buzz...Ubuntu knows software blackberry hardware could be An interesting marriage.
Similarly, a phone with a Blackberry-designed physical keyboard and [a maintained] WebOS on it would keep me from ever choosing a new smartphone again. I'd just keep buying the same phone over and over again, personally.
Well-known Canadian conglomerate, mostly doing insurance and reinsurance, but with some other operational buisnesses. Headed by Prem Watsa, often called the "Warren Buffett of Canada".
If Fairfax is offering to pay $4.7 billion to acquire RIM, Mr. Watsa somehow must have convinced himself that the value of RIM's business exceeds $4.7 billion by a large margin.
However, to me Blackberry looks like a dying platform suffering from anti-network effects (that is, fewer and fewer people use it, so fewer and fewer people want or need to use it). I don't understand how he gets comfortable with that number.
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[1] See page 8 of Fairfax's last annual letter to shareholders: http://www.fairfax.ca/files/Letter%20to%20Shareholders%20fro...