After a turbulent week for BlackBerry, the Canadian smartphone maker announced on Monday that it has reached an initial agreement for a consortium led by the firm’s largest shareholder, Fairfax Financial, to purchase the firm for $4.7 billion and take it back into private hands.
The company, which is laying off 40 percent of its workers, is expected to lose between $950 million and $995 million, mainly due to weaker-than-expected sales of its Z10 smartphone.
The news of the takeover bid could be what the firm needs to halt its spiraling losses and allow it to restructure out of the demanding glare of investors, and try to win back enterprises defecting to iPhones and Android smartphones.
No more ‘cool’ factor
A Reuters analysis noted that the firm has numerous problems it needs to address, including collapsing market share, a line of devices that have not captured the public’s imagination and a rising level of competition that threatens to undermine its once-unique selling points, such as top-of-the-line security and a strong enterprise focus.
In the early days of the smartphone, BlackBerry had a huge ‘cool’ factor. It was seen as the tool of choice for the discerning business user. President Obama was a fan, famously refusing to give up his BlackBerry when he first entered the White House.
Those days are long gone. In 2011, BlackBerry held an estimated market share of 11 percent. Today, it holds less than 3 percent of the market.
Keeping a low profile
One of the benefits of going private will be to give the company a lower profile, so its every action is no longer pored over by Wall Street analysts and investors.
“What they’re trying to do is take it out of the public market, restructure it, sell off the parts, maybe have it focus on being a platform for enterprise,” said John Stephenson, senior vice-president at First Asset Investment Management. “Clearly they’re going to have less scrutiny. Less scrutiny means they have time to work on this.”
Being able to operate without having shareholders demanding quick fixes means the company should be able to refocus on its core objectives, such as regaining the interests of enterprise customers, many of whom have jumped ship to iOS and Android in recent years.
There is no doubt that some parts of BlackBerry’s business may be more valuable than others. Its BlackBerry Messenger (BBM) instant messaging app, for instance, could be an attractive opportunity for a buyer, even though this suffered a setback recently after the rollout of the service to iOS and Android devices was halted when a leaked version created issues.
Many analysts believe a breakup of the firm’s assets is the most likely way forward for the firm. Ben Wood, chief of research at CCS Insight, said the spinning off of BBM is likely, as well as other structural changes such as cutting back on hardware.
However, Ontario-based analyst Carmi Levy had a different view. He told BBC Radio 5 Live: “Fairfax has a very deep history with the company.”
Prem Watsa, a former BlackBerry board member and now CEO, is an ardent supporter of the company.
“The sense is this is one private investment company that is not interested in breaking the company up for parts,” Levy said.
While the sale is unlikely to fix BlackBerry’s problems overnight, analysts agreed it was an inevitable move that could be one of the only ways the company stands a chance of long-term survival.