Who Should Buy Blackberry These Days?

Very few questions have the power of triggering diametric opposing answers such as the one in the title.BlackBerry Ltd, (BBRY) bears say that only a fool would touch this stock which they compare with a falling knife, while those who still have confidence in the company are claiming that the price has hit rock bottom and will only go upwards from here. The guys at Microsoft are surely asking themselves the same question, following their recent purchase of Nokia’s headset division.


The Impact of a Microsoft Purchase

BlackBerry is a shining example of what happens to a company that resists change and unfortunately for them they failed to learn anything from Nokia’s example. After posing strong gains in August and the first week of September, their stock plunged all the way to eight dollars per share. It is only fair to say that unless something out of the ordinary happens, Research in Motion is doomed and the stock would sink even further. The extraordinary event could be the purchase of BlackBerry by Microsoft Corporation, (MSFT), who would benefit from their patent portfolio and potential new partners.

They have already shown great interest in conquering the smartphones industry but they are so far behind Apple Inc, (AAPL) and Samsung Electronics Co, (SAMEq), that they need to do everything in their power to close the gap. Perhaps the only edge the company has over its competitors is security, with many institutions and official organizations using their operating system. Microsoft would love to brag about being capable of providing their users with the option of choosing between the two operating systems. There are reasons for why this purchase could take place in the foreseeable future and it has the potential of resuscitating BlackBerry stock.


The Consequences of Maintaining Status Quo

The obvious alternative for BlackBerry is to continue walking down this path, assuming that Microsoft doesn't make an offer. On paper things don't look extremely bad as the company has sufficient assets that can be leveraged to turn a profit, and BlackBerry has three times more assets than liabilities. The problem is that not all of them can be converted into cash at least not quickly and it would come as no surprise if they would all become the subject of a write-down at some point in the future.

Meanwhile the company is more concerned about cutting down on costs and the best proof that they mean business is that they plan on firing 40% of their workforce. If losses keep piling up, the cost-saving will not be sufficient to return BlackBerry on the right track and in the absence of sufficient capital, the company will be powerless against its richer rivals. If nothing changes, there is very little reason for optimism and at least on short-term, binary options traders should prefer put options.