For about six years I carried two phones – my personal cell phone and my BlackBerry. Guess which one got the most use? That’s right, the BlackBerry. When I was given a new touch screen model, I actually contemplated buying a personal one as well since it is so functional for email. But in the end, I didn’t because in my mind it was a work device, and I wanted something fun for myself.
Seems like I’m not the only one who thought that. After dismal results, BlackBerry is now forming a board committee to figure out what to do.
Here’s the story from the New York Times:
The struggling smartphone maker BlackBerry Ltd. said on Monday that it was exploring a potential sale of the company or a joint venture, as it continued to cast about for a solution to its troubles.
The company, once known as Research in Motion, also said last year that it was exploring “strategic alternatives.” This time, however, it disclosed the formation of a special board committee to oversee the process.
The Canadian company introduced its BlackBerry 10 this year in a make-or-break attempt to recover at least some of its once-dominant position in the market. But the phones arrived just as the high end of the smartphone market appeared to be saturated with Apple iPhones and handsets from Samsung and others using the Google Android operating system. BlackBerry’s innovations were also more incremental than revolutionary.
Bloomberg added this context about the decision to explore different opportunities:
The announcement builds on a move last year when BlackBerry hired JPMorgan and RBC Capital Markets to advise the company on strategic alternatives. At the time, Chief Executive Officer Thorsten Heins said a sale wasn’t the “main direction” he was considering. The company’s outlook has worsened since then, with the revamped BlackBerry 10 — the linchpin of a turnaround strategy — meeting scant demand.
“What BlackBerry is doing is the appropriate course of action,” said Charlie Wolf, an analyst with Needham & Co. in New York, who has the equivalent of a sell rating on the stock. The likelihood of a sale is at least 50 percent, he said. “The other options — much less likely.”
Heins will join fellow board members Timothy Dattels, Barbara Stymiest, Richard Lynch and Bert Nordberg on the new committee. Fairfax Financial CEO Prem Watsa, whose firm is BlackBerry’s largest shareholder, will step down from the board to avoid conflicts that might arise from the discussions.
“Given the importance and strength of our technology, and the evolving industry and competitive landscape, we believe that now is the right time to explore strategic alternatives,” Dattels, a TPG Capital executive who will serve as the committee’s chairman, said in the statement.
BlackBerry shares rose to $10.78 at the close in New York, marking the biggest one-day gain since March.
The Wall Street Journal story pointed out BlackBerry is losing corporate customers, putting even greater pressure on the stock:
As the company’s stock tanked in the wake of disappointing BlackBerry 10 sales, and the company’s base of corporate clients eroded further, that position became less tenable.
BlackBerry has lost corporate clients such as Halliburton Co. and Home Depot Inc. in the past several years, but more recent losses have come from the government sector it once dominated.
The Transportation Security Administration announced last year that it would replace BlackBerrys with Apple products, for example. Last month, The Wall Street Journal reported that the Federal Bureau of Investigation and U.S. Navy were close to signing deals with Samsung Electronics Co. for its devices.
The delay may have cost BlackBerry and its shareholders. The company’s market value climbed amid hopes for the new phones, but has since dropped sharply. Just three months ago, investors valued it at $8.2 billion. At Friday’s close, it was worth $3 billion less.
BlackBerry’s shares rose 10.5% on Monday after the announcement to $10.78, giving the company a market capitalization of $5.65 billion.
There are still some potentially attractive assets within BlackBerry if the board is willing to break the company up into pieces. Analysts generally consider its patent portfolio to be worth around $2 billion, its secure software network has long been considered the industry gold standard, and the company still has about $3 billion in cash.
If BlackBerry is beginning to lose its corporate and government customers, it may very well be close to the end. Breaking up the company may create the best value for shareholders, especially if BlackBerry is no longer able to keep up on the technology front. It will be interesting to see where it lands.
