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BlackBerry shares rise on possible Cerberus bidding interest

The company logo is see at the Blackberry campus in Waterloo, September 23, 2013. REUTERS/Mark Blinch
The company logo is see at the Blackberry campus in Waterloo, September 23, 2013. REUTERS/Mark Blinch

TORONTO/NEW YORK (Reuters) - The possibility of a second offer for BlackBerry Ltd reversed a slide in its stock price on Wednesday after the struggling smartphone maker said it expected to record $400 million in pre-tax charges related to cuts announced last month.

A person familiar with the matter told Reuters that private equity group Cerberus Capital Management LP was considering an offer for BlackBerry, which put itself on the block in August after bleeding market share to other smartphone makers.

The Wall Street Journal earlier named Cerberus as one of two firms that specialize in distressed investing that might be looking at BlackBerry. It did not name the second firm.

The Journal quoted one of its sources as saying that Cerberus aims to sign a confidentiality agreement with BlackBerry that would give it access to private financial information, but that it might in the end not bid.

Cerberus declined to comment.

BlackBerry shares were up about 1 percent, reversing a 5 percent fall earlier in the session.

The stock, at about $8 by mid afternoon, remained well below a tentative $9 a share offer from a consortium led by Toronto insurer Fairfax Financial Holdings Inc, which wants to take the smartphone maker private.

BlackBerry, which increasingly competes unsuccessfully with Apple Inc's iPhones and devices running Google Inc's Android operating system, accepted the tentative $4.7 billion Fairfax offer last month.

Fairfax and BlackBerry declined to comment.

"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," a BlackBerry spokesman said.

Waterloo, Ontario-based BlackBerry, previously known as Research In Motion, was founded by Mike Lazaridis, whose little wireless devices offered the first easy way for lawyers, executives and politicians to access email away from the office.

Lazaridis left the company last year but remains a major shareholder. The Journal said he is also assessing whether to bid. Lazaridis could not be immediately reached for comment.

In the latest in a string of underwhelming results, BlackBerry last week reported a wide loss and slumping sales. It will cut 40 percent of its workforce to halve operating expenses.

When BlackBerry reported these results, it said it would update its 2013 outlook in a regulatory filing, and the likely $400 million in expected charges formed part of the latest filing, released late on Tuesday.

It expects to take those charges - for severance, "network simplification costs" and other expenses - over the remainder of this fiscal year, which ends March 1, 2014, and in the first quarter of fiscal 2015. It had previously said it would take a $100 million charge for the current fiscal year.

In a blow to BlackBerry's hopes that it could succeed as a niche supplier of secure email services, the filing also said corporate and government customers have been slow to adopt BlackBerry's new servers, which manage new BlackBerry devices as well as iPhones and Android devices.

BlackBerry said it reduced the price of its touchscreen Z10 device during the quarter and plans further incentives to boost sales. It kept some BlackBerry 10 sales to distributors off the books in the quarter due to uncertainty over their eventual sale price and the rate at which they may be returned.

BlackBerry also said it intends to sell $122 million of redundant property, plant and equipment assets as part of its cost-cutting drive.

It said its property, plant and equipment had a net book value of $2.2 billion at the end of August, while it valued its intellectual property at $3.35 billion.

The proceeds of any real estate sale may make BlackBerry a more attractive target. But buyers may simply be looking for detailed estimates of the value of the assets.

(Reporting by Alastair Sharp and Allison Martell in Toronto and Greg Roumeliotis in New York; editing by Andrew Hay and Janet Guttsman)

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