Canadian investor Prem Watsa, dubbed the "Warren Buffett of the North," has nearly doubled his company's stake in embattled BlackBerry maker Research In Motion Ltd to just under 10 percent, according to a regulatory filing.
The move makes Watsa, chief executive of insurer and investment company Fairfax Financial Holdings Ltd and a RIM board member since January, the largest known shareholder of the Canadian company whose market value has dropped nearly 80 percent over the past year as its share of the smartphone market has tumbled.
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Shares of RIM rose 8 Canadian cents to C$6.94 in early trade on Monday on the Toronto Stock Exchange.
Analysts said the increased investment by Watsa has more to do with his long investment horizon and desire to bring down the cost of his initial investment in RIM than a bet on making a quick buck on a takeover of the BlackBerry maker.
"He said that he's looking to average down (his cost) and their investment horizon is normally three to five years -- they are not looking for a quick turnaround," said Sameet Kanade, an analyst at Northern Securities in Toronto.
In upping its stake, Fairfax reaffirmed its support for RIM's new chief executive, Thorsten Heins, and its new BlackBerry 10 device, on which the company is betting heavily. The BlackBerry 10 is due out early next year.
"We have taken the recent opportunity to average down our per share cost and we believe that we are now the single largest shareholder of RIM at just under 10 percent," Fairfax spokesman Paul Rivett said in an email.
"We strongly believe that Thorsten Heins is singularly focused on the success of RIM and its BB10, and we firmly support him and the entire BlackBerry team working tirelessly to bring this exciting new platform to market."
Speculation about a possible takeover of RIM ramped up as the share price dropped to below $7 this year from nearly $150 several years ago, but Kanade said Watsa's move suggests he is looking beyond the short-term fortunes of the mobile email pioneer.
Heins has hired bankers to conduct a strategic review that could result in joint ventures, partnerships or even an outright sale of the company. At the same time, Heins has said his main focus is on the long-delayed launch of the next-generation BlackBerry 10 platform, now due early next year.
RIM virtually invented mobile email with its first BlackBerry devices more than a decade ago, but its market share has evaporated as consumers flock to Apple Inc's iPhone and devices based on Google Inc's Android system.
RIM last month posted its first operating loss in eight years, and it was much deeper than expected. The company also said it was cutting 5,000 jobs, almost a third of its workforce, as it struggles win back its reputation as an industry innovator.
BELOW REPORTING THRESHOLD
Watsa had earlier reported that Fairfax had a 5.12 percent passive holding in Research In Motion as of January 26. The increase announced on Monday keeps Fairfax just below the 10 percent threshold that would force it to disclose any buying or selling of RIM stock.
The 9.9 percent stake in the BlackBerry maker, representing 51.9 million shares, is valued at about C$356.2 million ($349.2 million), as of Friday's closing on the Toronto Stock Exchange.
While Watsa is buying at a lower price than his previous purchases of RIM, Kanade said the stock still has room to fall.
"Is this the rock bottom? We don't think so. We think it goes lower, but we don't have $500 million to burn. If you have $500 million to invest and have a three- to five-year investment horizon, maybe this is a play for you," he said.
REPUTATION AS SHREWD CONTRARIAN
Watsa joined RIM's board in January as part of a front-office shuffle in which Heins replaced longtime co-CEOs Jim Balsillie and Mike Lazaridis.
As of May 22, Lazaridis was the biggest investor in RIM with a 5.66 percent stake, according to Thomson Reuters data.
Watsa, an Indian-born Canadian, has built a reputation as a shrewd contrarian investor by making moves such as betting against the U.S. housing market in the last decade and reaping billions when the market collapsed. But Kanade said the investment in RIM may not be one that ends up in Watsa's win column.
"Prem Watsa is known as the Warren Buffett of Canada. But not all of their plays go right -- even Warren Buffett is the first one to admit some of his investments have gone wrong," he said.
(Reporting By Andrea Hopkins in Toronto and Shounak Dasgupta in Bangalore; Editing by Frank McGurty; and Peter Galloway)