BlackBerry May Get to Juice Up in Private
BlackBerry's trajectory over the past several years has been a painful downward spiral that was slowed -- but not halted -- by efforts that came far too late in the game. It still has substantial value, however, and its largest shareholder wants to take it private to figure out how to eke out that value and transform BlackBerry into a profitable company once again.
BlackBerry on Monday announced plans to become a private company in a deal that is worth around US$4.7 billion. The company's largest shareholder, Canadian insurance company Fairfax Financial Holdings, has agreed to buy BlackBerry for $9 a share.
This comes just days after the company released a preliminary quarterly financial report that included a $1 billion loss for the last quarter, as well as plans to lay off about 4,500 employees.
BlackBerry closed Monday at $8.82 a share, down from as high as $10.45 before it plunged on Friday. Fairfax Financial currently owns approximately 10 percent of BlackBerry's common shares.
A special committee was formed in August to review strategic alternatives for the company, which included looking for interested buyers.
"The Special Committee is seeking the best available outcome for the Company's constituents, including for shareholders," said Barbara Stymiest, chair of BlackBerry's board of directors. "Importantly, the go-shop process provides an opportunity to determine if there are alternatives superior to the present proposal from the Fairfax consortium."
BlackBerry did not respond to our request for further details.
Value in the Brand
Fairfax is viewed as a white knight for BlackBerry, appearing on the scene when it most needs one. Or it could mean that Fairfax is merely jumping in to take advantage of a really good bargain.
"Blackberry still has value in their brand, their secure email technology, their servers scattered around the globe in companies, governements and the retail space," said telecommunications analyst Jeff Kagan. "The problem is they simply haven't caught on with their new tech."
Its inability to stay on top of the trends has been the downfall of the once-dominant BlackBerry. Its market share has been swallowed by Apple's iOS and Google's Android OS. It took BlackBerry too long to respond with its BlackBerry 10 OS -- and the delay might have dealt a fatal blow.
"The email service is certainly very attractive to someone like a Samsung, but BB10 is like Palm OS," said Roger Entner, principal analyst at Recon Analytics. "Nobody wants it, and making devices for the OS isn't going to help. They are in rough shape."
"This sale doesn't change anything in the direction the company is headed," Entner told the E-Commerce Times.
"It is still in free fall. The investors should consider themselves lucky that they got $9 a share. That is really spectacular number for them," he said.
"For the company -- they still have a product that doesn't sell," continued Entner. "This isn't going to change anything that they have private investment. The company was sold for $4.7 billion, but they are losing half a billion every quarter. How long can they sustain that before the private equity company goes out of business?"
However, going private could allow BlackBerry to leave the glare of the spotlight and focus on reinventing itself. While it has not managed to make much headwya with BlackBerry 10 and a few new devices, there is still time to reverse its fortunes.
"This is not the final play," Kagan told the E-Commerce Times. "Blackberry still has options -- but this deal makes sense, and I hope it gets done so they can rebuild. ... "This is the same idea that Dell Computer is doing. Go private and go through the messy process of rebuilding, outside of public view."
However, the deal isn't done just yet. Fairfax and its coinvestors are seeking financing, and BlackBerry is permitted to enter into talks with other potential acquirers during this time.
BlackBerry's Stymiest noted that the company would consider "superior" deals, and it now has until Nov. 4 to do so before the Fairfax offer is proposed to shareholders. Former coCEO Mike Lazaridis reportedly has approached private-equity firms about making an offer for BlackBerry.
"There are countless things that could get in the way, but at this point, if BlackBerry wants this, then it will be approved," said Kagan.
That could turn out to be a huge relief for the company, but it could just as easily be the beginning of a new era of trials and tribulations.
"Don't expect to see a renewal of BlackBerry," Kagan stressed. "Not yet anyway. Think about this like Motorola. They led through the 1990s then fell off the growth track.
"[Motorola] had a temporary uptick with the Razr, but then fell again," he recalled, "until they did a deal with Google Android and Verizon Wireless on the Droid. They are doing OK right now -- but they are a much smaller company now as well. [And] Google acquired them."