Months of losses, layoffs, and bad publicity had culminated in what sounded like a death knell for BlackBerry. The ailing mobile phone producer and service provider couldn’t be completely discounted, though, due to acquisition plans by Canadian investment firm Fairfax International, which seemed poised to buy the company, take it private, and find some way to bring into back to profitability. As of today, those rumors are bunk—Fairfax International will not be takingBlackBerry (Nasdaq-BBRY) private. Compounding the company’s woes, CEO Thorsten Heins is leaving.
Analysts were not all of the gloom-and-doom mindset as BlackBerry’s prognosis began to look dire. In September, BlackBerry announced that they would let go of 40 percent of their workforce and that they had suffered $1 billion losses in the previous quarter. Their stock went down 17 percent at the news, but some analysts remained optimistic that the firm could be restored to profitability. Bulls invoked the brand’s loyal customers—whose fanaticism tends toward near-Apple levels—and the possibility that the firm would gravitate away from handsets into a more information-technology focused direction. And there was the potential takeover by Fairfax, which seemed like a likely bidder in September. By mid-October, BlackBerry released a public letter stating: “You can continue to count on BlackBerry.”
Today’s announcements derail most of that optimism. The news about Heins stepping down and the sale to Fairfax being cancelled dragged the company stock down 16 percent.
Fairfax International modified its plans after the deal failed to go through, instead choosing to lead an investment of $1 billion (Fairfax itself providing a quarter of the money) to inject cash into the company. BlackBerry no longer appears to be pursuing a buyer, and will instead focus on alternatives structured around this new cash infusion.
What are BlackBerry’s options now? Some analysts are faulting BlackBerry for failing to reach out and directly reassure customers in these desperate times, so perhaps a serious PR campaign/outreach effort is in order. Writing for the New York Times, analyst Steven Davidoff calls the company “a binary play.” He adds, “It will either fail miserably or be a remarkable turnaround” for Fairfax. Davidoff thinks that Fairfax’s new form of investment “positions Fairfax and the other investors for a BlackBerry bankruptcy. BlackBerry has no long-term debt on its balance sheet, so this investment would now jump Fairfax ahead of the equity line for controlling BlackBerry in any bankruptcy proceeding.” As for BlackBerry itself, the investment “buys BlackBerry more time for an overhaul (or perhaps to get a bidder to change its mind), while also positioning some of its major investors to protect themselves if the turnaround effort fails.”
It looks like BlackBerry’s customers had best become acquainted with another more popular, more successful product named after a fruit. And as for investors who plan on profiting off of saving BlackBerry from ruin (not likely) or salvaging something out of the wreckage when it’s all said and done: Get in line now.
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