"We think over time BlackBerry is going to do well," Prem Watsa, CEO
of Canada's Fairfax Financial Holdings, which holds about 10 percent
of BlackBerry's shares, said at Fairfax's annual general meeting in
Watsa, who has built a reputation as a shrewd value investor through
winning plays such as his bet that the U.S. housing market would
fall into crisis, has built up Fairfax's BlackBerry stake over the
past three years. The smartphone maker's share price has tumbled
from a Nasdaq high of about $148 in 2008 to a low of just over $5
Fairfax sought partners last year in a $4.7 billion bid to take
BlackBerry private, but abandoned the plan after its due diligence
showed BlackBerry could not handle the large debt load it would have
to take on in such a deal.
Watsa said he still believes the company, which pioneered handheld
email but has watched its market share disappear to rivals such as
Apple Inc's iPhone, has valuable assets and is being underpriced by
"In my experience, markets go up, markets go down. When stock prices
come down, the marketplace ... predicts bankruptcy, and when it goes
up, it predicts years of fantastic growth. And the truth is always
in between," he said.
He also praised BlackBerry CEO John Chen and said the company was
"so fortunate" to have him.
Chen, who replaced Thorsten Heins as CEO after the buyout was
abandoned, is best known for turning around software maker Sybase in
the late 1990s.
In addition to its equity stake, Fairfax has C$500 million ($459
million) in BlackBerry debentures, convertible at $10 a share into
BlackBerry stock, after taking the lead in a debt offer after the
buyout talks fell through.
BlackBerry's shares were at $8 on Wednesday on Nasdaq and at C$8.69
on the Toronto Stock Exchange.
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While Watsa is optimistic on BlackBerry, he takes a dim view of the
stock market's prospects overall, maintaining hedges on Fairfax's
equity holdings as he sees potential for the U.S. economy to fall
into deflation, citing the country's huge debt load and the danger
of a property collapse in China.
He also singled out the high valuations of tech companies such as
Twitter and Facebook, alluding to the dot-com bubble of the late
"This is going to end in tears because it always has. Someday the
music is going to stop and all these companies are going to come
down quite dramatically," he said.
Fairfax's earnings performance has been volatile since the company
added the equity hedges in 2010. It posted a net loss of $573
million last year as stock markets rallied.
But Watsa maintains Fairfax is not geared to produce strong profits
on a quarter-to-quarter basis, but is focused instead on long-term
He said he won't add to the equity hedges currently in place, but
has no plans to reduce them either.
"We've got enough hedging. But we'll maintain those hedges until all
of this gets sorted out," he said.
(Editing by Jeffrey Hodgson; and Peter Galloway)
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