BlackBerry could put itself up for sale.
Review could lead to joint venture, partnership or sale
Hopes of BlackBerry returning to its glory days have all but disappeared as the smartphone company delivered the most damning proof that its new phones are a sales flop by moving forward with a plan that could result in the sale of its operations.
The board of directors at the Waterloo, Ont.-based company launched a review of “strategic alternatives” on Monday, a move which it says could also potentially take BlackBerry in other directions, such as a partnership or joint venture.
Regardless of the outcome, the decision throws the company’s future into further uncertainty.
BlackBerry could be scooped up by an interested buyer or even go private — an idea that has gained favour after reports said the board has recently opened to that option, even though it wasn’t specifically mentioned in the announcement.
In some ways, the company has been here before, but the stakes are different this time.
BlackBerry launched a softer review of its “strategic business model alternatives” in May 2012, which some analysts had expected would turn into a sale of certain assets.
That never materialized and BlackBerry went on to launch its new line of phones in late January. Since then, the new high-end BlackBerry 10 phones have struggled to gain favour in the highly competitive smartphone market dominated by Apple’s iPhone and the Android devices.
In the United States, the phones were considered a dud almost as quickly as they hit shelves, and other regions, such as Canada and the United Kingdom, delivered lukewarm sales figures.
A breaking point came when BlackBerry received initial sales figures for the cheaper version of the new models, dubbed the BlackBerry Q5. The phone launched last month and was greeted with underwhelming reviews and sales figures anecdotally that fell short of expectations, though official data haven’t been released by the company.
It seems that nearly everywhere BlackBerry turns the confidence in its future has faded and, even with a potential sale of its operations ahead of it, some observers still aren’t hopeful.
“I think there is likely no bright future for BlackBerry,” said Bernstein analyst Pierre Ferragu, in an email from the U.K.
His firm has long been pessimistic about the company’s stock price.
“Their technology isn’t differentiated anymore, which means consumers won’t switch to them and larger players won’t buy them out for that.
“Chinese vendors or a Microsoft could at some point be interested in buying what’s left of their user base — especially corporate clients and the brand — but that wouldn’t be at a premium of today’s stock price.”
The list of potential acquirers is short, with big players like Google and Apple out of the question — which makes it more likely that private equity players will make a move. But even the entry of enough willing investors still isn’t a guarantee.
BlackBerry shares rose more than 10 per cent, or $1.02, to close at $10.78 on the Toronto Stock Exchange, about $8 below the high in January when the stock was boosted by optimism over BlackBerry 10 smartphones.
Prem Watsa, who heads Canadian insurance firm Fairfax Financial, resigned Monday from the BlackBerry board because of potential conflicts of interest. The move suggests he expects to play a crucial role in the future direction of the company. He joined the board in early 2012 amid attempts to revitalize BlackBerry, then called Research In Motion, as its co-CEOs stepped aside and installed Thorsten Heins as chief executive.
Watsa has since increased his stake to about 10 per cent of the company. “I continue to be a strong supporter of the company, the board and management as they move forward during this process, and Fairfax Financial has no current intention of selling its shares,” he said in a statement.
BlackBerry’s strategic review will be headed by Timothy Dattels, a senior partner at private equity firm TPG Capital. BlackBerry founder Mike Lazaridis, who still owns 5.7 per cent of BlackBerry’s outstanding shares, will also be involved.
A report last week by research firm IDC showed BlackBerry has continued to lose market share, which fell to 2.9 per cent in the second quarter, when it sold 6.8 million devices.
Chief executive Heins noted there are “long-term opportunities” for BlackBerry, including new smartphones, the BlackBerry Enterprise Server for business customers and a new secure global data network.