In what many analysts and media have been speculating for the last couple weeks, BlackBerry announced this morning that it has signed a letter of intent with consortium to be led by Fairfax Financial Holdings. The news comes shortly after various news outlets reported that the smartphone manufacturer would lay off approximately 40 percent of its staff in the coming months.I first heard about this via my CNN app updates I receive on my smartphone when there’s breaking news…I won’t say if the phone is a BlackBerry (or not). However, the alert stated that Fairfax had acquired BlackBerry, and that the transaction would be valued at about approximately $4.7 billion. In addition, shareholders are set to receive $9 per share.
Within the next six weeks, the consortium, led by Fairfax, is offering a “go shop” during this due diligence period, similar to the one offered by Dell when the PC maker announced earlier this year it also desired go private. If an alternative offer is accepted, a termination fee will be required following the go-shop due diligence period.
From a personal standpoint, it saddens me that the smartphone manufacturer is moving toward a different direction. Many thought that BlackBerry would make a comeback when earlier this year, it introduced its BlackBerry 10 devices throughout the world with much fanfare. Remember when Alicia Keys took the stage at the launch in New York City to promote the new phones? Now, with the even more competitive space, which has largely been dominated by the Apple iPhone and Google Android, BlackBerry was continuing to struggle in a niche that it largely created and dominated at one point.
Perhaps it’s safe to say that BlackBerry is a victim of its own success? Wireless analyst Jeff Kagan, who has been up-front and to the point where it concerns BlackBerry’s state of affairs, likened the situation to that of what Motorola tried to do a few years ago. I’m sure we all remember when the company introduced its Razr phone back in the mid 2000s. This was the phone that was supposed to bring Motorola back on the radar. They had some mild success with the Razr, but then fell back again, and were eventually acquired by Google.
“This deal will take Blackberry private,” he said. “And private is the best place for Blackberry right now. It will give them the chance to reinvent the company and serve their smaller universe of customers without the distraction of Wall Street.”
While Kagan is optimistic about BlackBerry’s privacy route, another analyst, Jan Dawson, chief telecoms analyst at UK-based Ovum, was not as sympathetic, and is not “looking at the bright side," or sugar-coating the decision. "Taking BlackBerry private doesn't solve the fundamental problems at the company. First, the company's device sales are cratering, and its announcement last week that it no longer intends to pursue the consumer market is essentially the death knell for this business.” Dawson said. “BlackBerry's supply chain relies on scale for profitability, and it will never again be able to achieve the scale necessary to make money on devices. It's likely that BlackBerry will be out of the device business entirely by the middle of next year.”
Dawson’s assessment is one that has left much room for speculation, and now even more so, especially that there have been previous rumors flying around that BlackBerry was going to get out of the mobile device business and just focus on software (similarly how many have speculated that Dell is going to get out of the PC business). In addition, speculation surrounding the possibility that Lenovo was shopping to acquire BlackBerry has also been a conversation topic the last few months. Furthermore, BlackBerry’s once highly coveted BlackBerry Messenger (BBM) was set to be launched on Android and iOS, but the company instead decided to cease all production on this launch this past weekend.
“It's mobile device management business is entirely based on its ability to manage BlackBerry devices, and its cross-platform management is much less well established than those of major competitors like MobileIron and Airwatch,” Dawson added. “If you strip out BlackBerry's use of its QNX operating system for BlackBerry devices, you're left with a business that's worth less than $100 million. About the only part of BlackBerry that looks to be worth a significant amount at this point is its patent portfolio, and that certainly wouldn't justify the purchase price on its own.
Whatever happens in the next six weeks, during the go-shop period, we would like to personally give a shout out to all of the staff at BlackBerry that we have worked with and have supported us over the last few years. If you remember, BlackBerry was the first and original sponsor of our SMB 150 Awards ceremonies in 2012 (and again this year). They have always been a gracious and professional partner, and even generously donating new BlackBerry Z10 devices this year to all of our 150 winners!