BlackBerry Ltd. appears to have finally found a savior, and if all the details are worked out, the company will go private in a deal led by its largest sharehlder, Fairfax Financial, valued at $4.7 billion, or $9 a share, sometime in November.
Though a nice upside for a stock that got pummeled by last week’s whopper of an earnings warning, it’s a huge comedown from BlackBerry’s BBRY +0.23% former status as the pioneering smartphone maker that was revered for its secure network and high-quality handsets. The deal price is also less than one-quarter of the market value that the company commanded just three years ago.
BlackBerry agrees to $4.7B deal
Beleaguered smartphone maker BlackBerry struck a deal to sell itself to a group led by Fairfax Financial for about $4.7 billion in cash. Ryan Knutson joins digits.
BlackBerry may not be dead yet, but its drastic reversal of fortune is probably going to make for some good business school case studies. The company will probably join the ranks of fallen tech stars like Kodak, Digital Equipment Corp., and others who lost their leadership to nimbler tech rivals, either due to hubris, inability to change, size, or all of the above.
Here are a few guesses as to what the case studies and their experts will say about the fall of BlackBerry:
1) The company was too complacent to see the threat posed by Apple Inc.’s AAPL +0.64%iPhone and Google Inc.’s GOOG -0.07% Android platform. If you have by now forgotten former co-CEO Jim Balsillie’s rambling, often incoherent comments on analyst conference calls, it is worth revisiting some of them.
For example, when asked in June 2008, a year after the iPhone was launched, if the company was worried about overlap with the Apple customer base of the iPhone, Balsillie initially responded that the question had no relevance to the company’s way of thinking.
He went on to add: “Because once you decide to become a BlackBerry user, you kind of stay there for life, and let’s not be too penny wise, pound foolish when we do get very good absolute margin,” Balsillie said.
2) It kept two co-CEOs in place far too long, both of whom were its largest shareholders. And when Balsillie and co-CEO Mike Lazaridis finally decided to step down in January, 2012, they were replaced with another insider, Chief Operating Officer Thorsten Heins, who perpetuated the strategy of continuing with a whole new operating system, BlackBerry 10. Needham & Co. analyst Charlie Wolf said at the time that the changes “appear more cosmetic than substantive.”
Reuters
This is one case when it seemed obvious to outsiders that the company needed a major change, much in the manner of IBM Corp.’sIBM +0.51% hire of Lou Gerstner as its CEO, the company’s first CEO who didn’t come from inside the company. That move helped lead to big changes in the company’s culture and rid it of much of the complacency and arrogance that had developed after years of industry dominance.
A further data point as an example of how arrogance has persisted at BlackBerry: In July, despite its recent struggles, the company added a corporate jet, albeit a used Bombardier from 2006, to its current fleet of corporate aircraft, all of which are now being sold.
3) It clung to its own proprietary technology, even thought it could have licensed the now dominant Android operating system.
Even the troubled Nokia Corp. NOK -1.50% was at least experimenting with Android andbegan to consider jumping ship to from Windows Phone, a move which is believed to have cemented Microsoft Corp.’s MSFT -0.43% interest in acquiring the handset business of Nokia.
The BlackBerry Z10.
BlackBerry’s steadfast adherence to developing its own next-generation operating system, BlackBerry 10, in the face of increased competition from cheaper Android-based devices, looks like it took the wrong path when it was at a crossroad.
BlackBerry’s biggest investor, though, seems optimistic about its future. Prem Watsa, chairman and CEO of Fairfax, which is spearheading the buyout offer, said that going private will “open an exciting new private chapter for BlackBerry, its customers, carriers and employees.” Watsa said BlackBerry can deliver immediate value to shareholders, while executing a long-term strategy as a private company.
Maybe. But as the company looks to go private and focus on a few devices for corporate and so-called “prosumers,” it’s unclear how it will end up. But you can bet that business school professors as well as some tech companies will be studying and trying to learn from the once great company’s mistakes.
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