Analysis: By going private, Blackberry may buy time to fix itself

Tue Sep 24, 2013 4:38pm EDT
 
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By Alastair Sharp

TORONTO (Reuters) - A tentative deal to take BlackBerry Ltd private will not necessarily resolve challenges that pushed the smartphone maker into a corner in the first place, but it gives the struggling company some breathing room.

Private or public, BlackBerry's problems remain the same: slumping market share, mostly uninspiring devices and cut-throat competition threatening the state-of-the-art security of the BlackBerry network.

"It potentially buys the company time, analyst James Cordwell of Atlantic Equities in London said of Monday's proposal from Fairfax Financial Holdings. "What it doesn't solve is, what's the long-term strategy for Blackberry."

BlackBerry virtually created a lucrative professional market for email devices, but rivals have muscled in and Apple Inc's iPhone has set a new gold standard for consumers.

On Friday BlackBerry warned of slumping sales and a big operating loss, and on Monday it said it had accepted a $4.7 billion offer from a consortium led by Fairfax Chief Executive Prem Watsa.

BlackBerry accounted for just 2.8 percent of worldwide smartphone sales in the first half of 2013, down from 5 percent in 2012, and 11 percent in 2011, according to IT research firm Gartner. The company has lost the "cool" factor that once made it indispensable in Britain and elsewhere.

BlackBerry put itself on the block in August, although the Fairfax bid is the only one on the table so far. BlackBerry has until November 4 to seek better offers, and Fairfax has until then to conduct due diligence and get financing for the plan.

"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. The company owns about 474,000 BlackBerry shares, according to Thomson Reuters data.   Continued...

 
A man walks by a Blackberry sign at the Blackberry campus in Waterloo, September 23, 2013. REUTERS/Mark Blinch