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Cerberus circles BlackBerry as Canucks warn of more losses

From 'rapid growth' to, er, the other thing

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Sources say a second firm is contemplating a bid to buy BlackBerry, even as the spavined smartphone vendor warned Wall Street on Wednesday of further woes to come.

Cerberus Capital Management is looking to sign a nondisclosure agreement that would give it full access to BlackBerry's books, The Wall Street Journal reports, citing an anonymous insider.

That source said Cerberus – named after the mythical three-headed dog that prevented the dead from escaping the Underworld – has yet to propose an offer to acquire BlackBerry and that it may still decide to pass. But investors could view a bid from Cerberus as being stronger than the current offer from a consortium of Canadian companies led by Fairfax Financial Holdings.

Fairfax proposed a buyout at $9 per share, but market-watchers are skeptical that it will be able to raise the capital necessary for the deal at that price, and BlackBerry's stock price has sunk below $8 in the interim.

The latest blow to BlackBerry's shares came on Wednesday, with the company's newest filing with the US Securities and Exchange Commission.

In that brief, BlackBerry said it expected to take another $400m in charges through the rest of its fiscal 2014 – a fourfold increase from the $100m it predicted in the first quarter, and those will be in addition to the $934m writedown it reported for its second quarter last week.

Most of those future charges, it explained, would be related to its Cost Optimization and Resource Efficiency (CORE) program, a company-wide effort designed to streamline its operations. Among other things, BlackBerry says it plans to reduce the number of models in its smartphone line and consolidate its global manufacturing operations.

Expecting such tweaks to heal BlackBerry's financial ills, however, seems overly optimistic. In its SEC filing, BlackBerry explained that the sales slowdown it has seen in the US is now happening globally, "including in international markets where the Company has historically experienced rapid growth."

In fact, no regions saw growth in BlackBerry's second quarter. Its revenues were down 30.3 per cent in North America; down 38 per cent in Europe, the Middle East, and Africa; down 18.2 per cent in Latin America; and down 13.5 per cent in the Asia Pacific region.

Whether a potential buyer might be able to reverse those trends, or whether it might simply choose to carve BlackBerry and its patent portfolio up for sale, remains to be seen. Should Cerberus decline to make an offer, however, former CEO Mike Lazaridis is rumored to also be considering a bid, possibly as part of the Fairfax group.

When asked by the WSJ to comment on a possible deal with Cerberus, a BlackBerry spokesman said, "We do not intend to disclose further developments with the respect to the process until we approve a specific transaction or otherwise conclude the review of strategic alternatives." ®

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