Published December 21, 2016
BlackBerry Ltd., the struggling Canadian smartphone maker, is considering putting itself up for sale after the lackluster debut of the BlackBerry 10 lineup dimmed its prospects as an independent company
The company said Monday that its board has formed a special committee to explore "strategic alternatives" in hopes of enhancing the company's value and boosting adoption of its BlackBerry 10 platform.
The company said its options could also include joint ventures, partnerships, or other moves.
The Canadian company's stock jumped 5.2 percent to $10.26 in midday trading Monday.
The BlackBerry, pioneered in 1999, 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. has since 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 BlackBerry 10 designed to better compete. But its market share continues to lag, and the company warned in June of future losses.
Mike Walkley, an analyst with Canaccord Genuity, said sales are getting worse even with price reductions for the new phones.
"Now they have to go to the next step of what's best for the company and shareholders to survive long term because it doesn't look promising on BlackBerry 10 sales," Walkley said.
Monday's announcement marks the second time BlackBerry has said it has hired bankers to help weigh its options since Thorsten Heins became CEO in early 2012. The company had faced numerous delays modernizing its operating system with the BlackBerry 10. During that time, it had to cut more than 5,000 jobs, and shareholder wealth declined by more than $70 billion.
Heins had said then he was not actively looking to sell BlackBerry, but wanted to be prepared given the challenging environment. He ended up focusing on launching BlackBerry 10 this year, but the company warned in June of future losses.
The strategic review will be headed by Timothy Dattels, who joined BlackBerry's board last year and is a senior partner at TPG Capital, one of the world's largest private equity firms.
BlackBerry also announced Monday that board member Prem Watsa, the company's largest investor with a 9.9 percent stake, resigned from the board "due to potential conflicts that may arise during the process."
Watsa could be a bidder. Watsa has said that he believes BlackBerry can turn itself around, but that it might take three to five years. He's the founder of insurance company Fairfax Financial Holdings Ltd. and is one of Canada's best-known investors.
Watsa stepping down from the board doesn't necessarily mean he's interested in buying the company, Walkley said — if Watsa were interested, he would have made that move some time ago.
But BGC Financial analyst Colin Gillis said Watsa, partnered with some financial backers like a pension fund, could be bidders. He said technology companies like Apple, Google or Microsoft would not be interested because already have their own mobile platforms.
"Anyone who is a player in the space has taken a sniff and moved on," Gillis said. "Now you've got financials."
Gillis also said he doesn't see Canadian or U.S. regulators allowing BlackBerry to be owned by a Chinese company. Major clients like the U.S. Department of Defense would abandon the company, he said.
"Its core reputation for security would fall apart really fast," Gillis said.
Gillis said if BlackBerry is able to find a private buyer it would allow management to focus on a turnaround and get out of the glaring public spotlight.
"If they can get it done they should absolutely do it. If they have a future it would be better to do out of the public eye," Gillis said.
BlackBerry said in its release that there can be no assurance that the exploration process will result in any transaction and declined further comment unless and until its board approves a specific sale or concludes a review of strategic alternatives.
JP Morgan Chase & Co. is serving as its financial adviser and Skadden, Arps, Slate, Meagher & Flom LLP and Torys LLP are legal advisers.
Based on reporting by The Associated Press.
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