Don’t count Blackberry out yet

BlackBerry has put itself in play, but at this point no one knows whether it will be taken private or possibly sold to a foreign company.

One thing is for sure, the company that created the smart phone, the pride of Canadian high-tech, has fallen on difficult times.

And the question is, what can the federal government do to help?

If BlackBerry CEO Thorsten Heins were having this conversation with Industry Minister James Moore, he would probably say something like: “Just give us the flexibility to make the right decision for the company, the industry and the country.”

That’s a pretty good message. The government’s role should be to help BlackBerry find a way through this, and help keep the company whole rather than broken up for its $3 billion in cash, its patents and its R&D.

Canadians have a certain amount of pride in BlackBerry, which has brought enormous value added to the Canadian brand in nearly 180 countries worldwide.

It’s not as if we have a lot of world champions in this country. You can pretty much count the others on the fingers of one hand. Bombardier in aviation and rail transport. CAE in flight simulators and training. Barrick Gold in mining. Peerless in men’s clothing. And in financial services, the Big Five Canadian banks, all in the Top 10 in North America in market capitalization and assets.

BlackBerry’s current market cap of nearly $6 billion, or around $11 per share, is nothing to sneeze at, but it was once nearly 15 times that, or $150 per share in 2008.

Then along came the iPhone, and then the iPad. BlackBerry’s once dominant share of the global smart phone market has since shrunk to three per cent. And its PlayBook tablet got killed. It didn’t have email or messaging at first. How did that happen? Apple’s Steve Jobs wasn’t an inventor, but was he was a great designer, with an intuitive gift of giving consumers what they wanted before they knew what they wanted. Turned out they wanted smart phones they could play games on.

BlackBerry bet the future of the company on the rollout of the BlackBerry 10 last winter, but while the reviews were generally strong, sales have been weaker than expected.

And yet, in a business where a week is a long time and a year an eternity, it would be foolish to suggest BlackBerry is done. It has a strong cash position and no debt. It has global brand equity. It has a culture of innovation. And it is by far the largest private sector R&D company in the country — the only $1 billion R&D player in the land.

It should not be forgotten what BlackBerry has contributed to the economy and life of this country. Essentially BlackBerry has done for Waterloo and southwestern Ontario in the first decade of this century what Nortel Networks once did for the city of Ottawa in the final decade of the last one.

It has been the mother ship of high-tech in the region, as many BlackBerry suppliers became successful startups, or as former employees went out on their own. If you want proof of Michael Porter’s diamond cluster of a critical mass of excellence in business, you need look no further than Waterloo.

Nor should it be forgotten that Jim Balsillie and Mike Laziridis, the visionary co-founders of Research in Motion, have been exemplary business leaders in terms of giving back to their community and country.

Balsillie generously endowed the Centre for International Governance Innovation (CIGI) as well as the Balsillie School for International Affairs in Waterloo. For his part, Laziridis created the Perimeter Institute, an R&D centre of excellence, also in Waterloo. These guys never forgot where they came from, and as Laziridis has said: “We changed the way people communicate.” Did they ever.

And so, now what? And what of Ottawa’s role?

BlackBerry has struck a committee to conduct a strategic review of its options. One of them is taking the company private, where it wouldn’t have the bother of quarterly earnings calls.

One potential buyer is Fairfax Financial Holdings, which owns nearly 10 per cent of the company. The investment company is controlled by Prem Watsa of Toronto, who resigned from BlackBerry’s board last week to avoid any conflict of interest. Both the Canada Pension Fund Investment Board and the Caisse de Depot, through its CEO Michael Sabia, have expressed interest in investing in BlackBerry should it go private.

But any sale of BlackBerry to a foreign buyer would have to be approved by Industry Canada through Investment Canada. Microsoft has been said to consider bidding on BlackBerry in the past, and the smart phone segment might be a good fit.

A Chinese company, such as tech and telecom giants Huawei or ZTE, is another possibility. But any sale to China would be problematic for the Canadian and U.S. governments, given the importance of BlackBerry’s security features.

And that’s not about whether a sale of BlackBerry meets the significant benefit test of Investment Canada. It’s about national security, and rises to a much higher threshold of approval.