Trading in BlackBerry shares was temporarily halted this morning, as the company put out a major announcement. Because of the failure to close a deal with Fairfax Financial Holdings — and perhaps emboldened by the success of the BBM launch for iOS and Android — the company has abandoned plans to find a strategic partner. Instead, it is setting out details for new funding.
Is this the start of a much-predicted move to a software and services company? Certainly a shake-up of the board is just the start, with incumbent CEO Thorsten Heins to be replaced by John Chen, and other executives on their way out.
Although Fairfax failed with its original bid, it will take part in the $1 billion investment that should help the company refocus and restructure under the new management.
No Home Run for Fairfax
After months of due process, Fairfax failed to make good on its intention of a $4.7 billion buyout for BlackBerry. Instead, the investment company is settling on a tip-and-run, leading a $1 billion debenture offering to raise money, along with other institutional investors, for the embattled smartphone and services company.
That should shore up the debt-free smartphone maker, diluting its shares by around 16 percent but giving BlackBerry room to determine its destiny. That destiny was shaken up last week as around 20 million users signed up for its BBM service on iOS and Android devices in a few days.
With no sign of an improvement in its smartphone sales, BlackBerry could be looking to reposition itself as an enterprise-only hardware maker or to possibly sell off the smartphones unit and focus on its software and services applications.
BBM generates no revenue at the moment, but has more than 80 million users. BBM is trialling new social media services like BBM Channels for social-media-like interactions that can be monetized or backed with marketing to help bring in cash.
BlackBerry's Clouded Future
John Chen will lead this new strategic move in the short term as the company looks for a full time replacement CEO. He has with a background in technology businesses at Sybase, Unisys and Siemens, and was a member of the board at Disney. Chen rose to prominence helping to save Sybase by creating mobile business-focused apps.
While BlackBerry still has cash of around $2.5 billion according to its last quarterly figures, and should get this latest funding in just a couple of weeks, it seemingly now lacks the firepower and partners to continue in the consumer smartphone marketplace dominated by well-monied market leaders and heavyweight contenders. In the face of that, the company has said it has no plans to shut its handset division.
Just look at November's tablet line-up, BlackBerry has struggled in hardware since its doomed PlayBook launch and has no entrant among the hottest selling devices of the year. Instead, it may choose to focus on its software and services, including BBM and BlackBerry Enterprise Services with a device-agnostic enterprise approach to maintain relevance in the modern business landscape, increasingly dominated by consumer-focused BYOD schemes.
For investors, none of this is great news, with the company stock down more than 33 percent on the year. Those looking for a profit may have to wait a long time before BlackBerry, if ever, reaches its previous stock highs.