On Monday BlackBerry abandoned its sale process and announced it will replace its chief executive.
The only formal offer to buy BlackBerry – a tentative one – had come from Fairfax, which wanted to take the company private for $4.7 billion. But sources said Fairfax boss Prem Watsa had trouble financing the deal. Fairfax will now end up with $250 million of the debt offering.
“They never had any money beyond the Fairfax money,” BGC analyst Colin Gillis said. “It’s an under $5 billion market cap company with $2 billion in cash, you put up a $1 billion and you couldn’t get the rest?”
Gillis said it’s not an unexpected outcome because the stock was trading well below the possible $9 bid price. He said potential investors must have looked at the books and didn’t like what they saw.
“Fairfax’s investment will buy the company some time, which it badly needs, but the company needs a new strategy more than ever,” said Jan Dawson, Ovum’s chief telecoms analyst, noting that communication on the strategy must start “very soon”.
The smartphone maker will also replace its chief executive, Thorsten Heins, who spent two years trying to revive the company before admitting defeat and trying to find a buyer.
He will be replaced on an interim basis by John Chen, the former head of software firm Sybase, who is also joining BlackBerry’s board as executive chair, in charge of “strategic direction, strategic relationships and organisational goals”.
Chen, who joined private equity group Silver Lake as senior adviser a year ago, said his involvement with BlackBerry has nothing to do with his ties to Silver Lake, which partnered with Michael Dell recently to take computer-maker Dell Inc private, reports Reuters.
“I know we have enough ingredients to build a long-term sustainable business. I have done this before and seen the same movie before,” he told Reuters. He added that he would shake up BlackBerry’s management team, with a slew of internal promotions and new appointments from outside the company.
Shares in the Canadian smartphone maker tumbled to as low as $6.40 after the Nasdaq stock exchange opened in New York – their lowest price in a decade. They recovered slightly, but were still down more than $1.1, or 14pc, to $6.68 in lunchtime trading.
BlackBerry’s new $1bn investment plan follows a tumultuous period for the company, which was once Canada’s corporate crown jewel.
“Now we’re back to the downward spiral,” said BGC Partners analyst Colin Gillis. “They’ve got $1 billion more cash that buys them time. The drumbeat of negativity is likely to continue.”
BlackBerry, founded in 1999, grew from a small technology startup into a multibillion-dollar company by pioneering on-the-go email. It had been the dominant smartphone for on-the-go business people and other consumers before Apple debuted the iPhone in 2007 and showed that phones can handle much more than email and phone calls.
BlackBerry Ltd. been hammered by competition from the iPhone as well as Android-based rivals. In January, the company unveiled new phones running a revamped operating system called, says the NY Daily News.