BlackBerry blues: Onetime smartphone champ mulls sale
Following the failure of their new BlackBerry 10 operating system-equipped phones to make a splash on the market, the Canadian company is now looking at different options to boost the adoption of its new platform.
The company formed a special committee tasked with exploring “strategic alternatives”, which could include joint ventures, partnerships, or other options.
“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,” said Mike Walkley, an analyst with Canaccord Genuity.
However, BlackBerry said in its release that there can be no assurance that the exploration process will result in any transaction.
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.
JP Morgan Chase & Co. is serving as the company’s financial adviser, with Skadden, Arps, Slate, Meagher & Flom LLP and Torys LLP being legal advisers.
BlackBerry, which once dominated the smartphone market for on-the-go business people, is now ranked fourth globally, trailing Microsoft.
Pioneered in 1999, it was a market leader until Apple rolled out the iPhone in 2007 and showed that phones can handle much more than email and phone calls. BlackBerry smartphones have subsequently been hammered by the competition, including the ubiquitous iPhone as well as Android-based rivals.
The latest BlackBerry announcement marks the second move by the company to hire bankers to help weigh its options since Thorsten Heins became CEO in early 2012. The company 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.
Looking at potential buyers
Shortly after the Blackberry announcement, analysts began speculating who might want to buy a BlackBerry.
Technology companies like Apple, Google or Microsoft would unlikely be interested as they already have their own mobile platforms, according to BGC Financial analyst Colin Gillis.
“Anyone who is a player in the space has taken a sniff and moved on,” Gillis said.
Alternatively, South Korea's Samsung could be interested in buying BlackBerry, according to Jefferies analyst Peter Misek. The reason: Google has already launched a new phone of its own from its Motorola division – the Moto X. In its quest for an independent operating system for its phones, adding BlackBerry's capabilities would be far easier than developing a system from scratch, Misek said.
There has also been speculation that the PC maker Lenovo or telecommunications equipment maker Huawei, both based in China, were interested in BlackBerry. But Gillis also said he does not see Canadian or US regulators allowing BlackBerry to be owned by a Chinese company.
Major clients like the US Department of Defense would abandon BlackBerry if it was bought by a Chinese company, Gillis said. “Its core reputation for security would fall apart really fast.”