BlackBerry on Monday announced plans to become a private company in adeal that is worth around US$4.7 billion. The company’s largestshareholder, Canadian insurance company Fairfax Financial Holdings,has agreed to buy BlackBerry for $9 a share.
This comes just days after the company released a preliminaryquarterly financial report that included a $1 billion loss for thelast 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 strategicalternatives for the company, which included looking for interestedbuyers.
“The Special Committee is seeking the best available outcome for theCompany’s constituents, including for shareholders,” said BarbaraStymiest, chair of BlackBerry’s board of directors. “Importantly, thego-shop process provides an opportunity to determine if there arealternatives superior to the present proposal from the Fairfaxconsortium.”
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 mostneeds 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 emailtechnology, their servers scattered around the globe in companies,governements and the retail space,” said telecommunications analystJeff Kagan. “The problem is they simply haven’t caught on with theirnew 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 aSamsung, but BB10 is like Palm OS,” said Roger Entner, principalanalyst 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 isheaded,” Entner told the E-Commerce Times.
“It is still in free fall.The investors should consider themselves lucky that they got $9 ashare. That is really spectacular number for them,” he said.
“For the company — they still have a product that doesn’t sell,” continuedEntner. “This isn’t going to change anything that they have privateinvestment. The company was sold for $4.7 billion, but they are losinghalf a billion every quarter. How long can they sustain that before the private equity company goesout of business?”
However, going private could allow BlackBerry to leave the glare of thespotlight and focus on reinventing itself. While it has not managed to make much headwyawith BlackBerry 10 and a few new devices, there is still time to reverse its fortunes.
“This is not the final play,” Kagan toldthe E-Commerce Times. “Blackberry still has options — but this deal makes sense, and I hope it getsdone so they can rebuild. … “This is the same idea that Dell Computer is doing. Go private and gothrough 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 theFairfax 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 thispoint, 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 bethe beginning of a new era of trials and tribulations.
“Don’t expect to see a renewal of BlackBerry,” Kagan stressed. “Notyet anyway. Think about this like Motorola. They led through the1990s then fell off the growth track.
“[Motorola] had a temporary uptick with the Razr, but then fellagain,” he recalled, “until they did a deal with Google Android andVerizon Wireless on the Droid. They are doing OK right now — but theyare a much smaller company now as well. [And] Google acquired them.”