Today's Market: Black Monday For BlackBerry Shareholders

Includes: AAPL, BBRY
by: Matthew Smith

We had to adjust this morning's article to a condensed version to cover the late breaking, big news concerning BlackBerry - a company we have been wary of throughout this entire sales process. Tomorrow we will resume our normal article format.

There is a lot of news out on this Monday, but the biggest news is that surrounding BlackBerry (NASDAQ:BBRY) and the ouster of their CEO after their plans to sell themselves fell apart. The St. Louis Fed President was on CNBC this morning but really did not say anything too significant and for the most part simply talked up Janet Yellen and her credentials when the topic was brought up.

This week will start off slowly in regards to economic news, but as the week progresses the news flow will pick up with both Thursday and Friday being big news days.

Chart of the Day:

(Click to enlarge)

Source: Yahoo Finance

We have economic news today and it is as follows:

  • Factory Orders (10:00 a.m. EST): Est: 1.8%

Asian markets finished lower today:

  • All Ordinaries -- down 0.41%
  • Shanghai Composite -- up 0.00%
  • Nikkei 225 -- CLOSED
  • NZSE 50 -- down 0.06%
  • Seoul Composite -- down 0.70%

In Europe, markets are trading higher this morning:

  • CAC 40 -- up 0.35%
  • DAX -- up 0.33%
  • FTSE 100 -- up 0.54%
  • OSE -- up 0.36%

BlackBerry Saga - Black Monday For Bulls ...

Over the past few months we have tried to stress that the so-called value and desirability of BlackBerry's franchise was far less than many in the market believed it to be. The bid from friend's of the Canadian company never seemed to be a concrete offer and lacked funding, a fact which further cemented our belief that the company was not any closer to being taken over than they were at any other time in the company's history. With today's announcement that the company was abandoning the sales process, we feel proud that we were able to keep readers from venturing into the trade and getting tangled up in this mess. The cherry on top of all of this is that the CEO is being shown the door, which only adds to the chaos and highlights to everyone just what a mess this is.

Shares are down about 20% in pre-market trading and shares are halted. This is a big loss, but for those who are still bullish of the name it is about time to get real. As of right now this is no longer an investable security, but rather a trader's security. Investors can kick the tires all they want, but at the end of the day the lack of a deal only highlights the potential inability of BlackBerry to service their current customers and those needing to upgrade their hardware. It was a worry that a deal was supposed to solve, but the fact that no other company wanted to purchase these assets really does highlight the concern from key customers that BlackBerry might not be around long enough to provide technical support and warranty support for those purchasing their newest phones.

The one good bit of news investors received today was that Fairfax has gathered some partners and pooled $1 billion to invest in BlackBerry. The company really did not need any more capital, but on a day like this it certainly cannot hurt. Look for lots of blood in the streets today.

An Apple A Day Keeps the Doctor Away ...

As has been our opinion throughout this entire saga, Apple (NASDAQ:AAPL) shall be the big winner. The door is now open for customers to abandon their long established relationships with BlackBerry to go to new providers such as Apple, which has already made significant inroads into corporate settings with their iPad and various high powered computers. The fact that many people have used Apple products now also lowers the impact from training expenses and paves the way for quicker adaptation.

It seems to us that Apple's iPhone shall grab a good chunk of BlackBerry's business over the next few years, as companies abandon the dated smartphone manufacturer and streamline their tech systems to enable synergies (such as the file sharing capabilities of "iDevices" among each other and fewer operating systems that employees have to learn and keep up to date on). There is not a whole lot of market share to steal from BlackBerry these days, but when you look at the customers and the services they require it sure seems that Apple will be the new hardware supplier of choice as clients migrate to new suppliers.

We remain bullish on Apple shares and continue to expect them to close out the year strongly.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.