BlackBerry will burn through most of its cash in the next 18 months, a senior independent analyst has warned, leaving the smartphone maker with "material liquidity problems".
Chief executive Thorsten Heins last week described BlackBerry as a financially strong company with $2.6bn (£1.6bn) in cash and no debt. But the group is likely to tear through nearly $2bn of its remaining funds by February 2015, according to Pierre Ferragu at Bernstein Research.
The analysis was published just as efforts to organise an auction of the company appeared to be gaining momentum. Cerberus, the distressed asset specialist, was on Wednesday reported to have asked to see BlackBerry's accounts in order to gather the information needed for a bid.
Fairfax Financial, the private equity group run by former BlackBerry board member Prem Watsa, last week made a $4.7bn preliminary offer.
A rapidly deteriorating cash position would dent hopes of a sale, because private equity buyers will raise funds by borrowing against BlackBerry's savings plus a sale of its intellectual property.
"Our detailed analysis of the recent filing of BlackBerry reveals a cash position far worse than we modelled," wrote Ferragu in a note. "We believe BlackBerry is likely to burn close to $2bn in the next six quarters on a standalone basis, leading the company into material liquidity problems."
The analyst revised his numbers after BlackBerry filed its second quarter results this week. The downbeat assessment was based on a faster than expected fall in service revenues from users, with a forecast that the company will lose 7 million subscribers in the next quarter, combined with higher than expected spend on patent licences.
"We now believe there is virtually no collateral for a bank loan, and no credible story for a break up to justify more than a couple of billions for the equity," said Ferragu.
Cerberus, whose interest was first reported by the Wall Street Journal, is understood to have offered to sign a non disclosure agreement. A spokesman for the firm declined to comment.
Heins launched a new generation of BlackBerry phones in January, but the innovation left consumers cold. While many BlackBerry loyalists still prefer its physical keyboard to touchscreen machines, developers have not embraced the new BB10 devices, meaning many popular games, social and media applications are not available on the phones.
In 2011, BlackBerry still accounted for 14% of all smartphone sales worldwide, but according to industry analyst IDC its share had fallen to 3% by the second quarter of this year.
A spokesman for BlackBerry said: "We do not intend to disclose further developments with respect to the process until we approve a specific transaction or otherwise conclude the review of strategic alternatives."
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