Break-up seems the most likely option for BlackBerry as doubts grow about its only firm takeover bid so far, from its largest shareholder, Fairfax Financial Holdings. The Canadian firm is reported to be reaching out to a whole range of technology firms to make alternative offers, but most are only interested in certain areas of its business, particularly those where it still has real differentiation ‘ its traditional enterprise sectors, particularly platforms for security and device management in the BYOD (bring your own device) environment.
According to Reuters, BlackBerry has asked for preliminary expressions of interest from potential strategic acquirers, including Google, Cisco, SAP and Intel, and even some of its smartphone rivals, such as LG and Samsung. This does not mean that any of the companies will submit an offer this week, but each of them has been linked to interest in BlackBerry in the past, and they would provide the strategic direction for the company that Fairfax might not.
Without the entry of an industry major, there is the sad prospect of BlackBerry ending up in a low-rent bidding war between investors which focus on ‘distressed’ companies. One such firm, Cerberus Capital Management, was reported last week to be seeking a confidentiality agreement with BlackBerry as preparation for a possible offer. There is even the prospect of co-founder and former CEO Mike Lazaridis heading up his own bid, having increased his stake in the firm this week.
According to Bloomberg, investors are increasingly skeptical that Fairfax’s tentative $4.7bn bid will succeed. Concerns focus on the uncertainty about how Fairfax will finance its deal, and its refusal to name its partners in the venture.
However, there could still be the chance for key BlackBerry technologies to find a home with an industry major, if suitors are allowed to bid for the most valuable pieces, such as its patents or enterprise servers. ‘If you break up the company, you’re going to get more than the company is worth right now,’ Sachin Shah, a merger arbitrage specialist at Albert Fried, told Bloomberg.
The value of certain assets is being assessed by many analysts. Steven Li of Raymond James Financial thinks the enterprise network could reach between $550m and $1.1bn (the variation largely depending on how far subscriber decline could be stemmed by the confidence boost of a new owner); while Christopher Marlett, CEO of MDB Capital Group, a patent-focused investment bank, estimates the IPR portfolio could fetch $2bn to $3bn.
The handset business is lossmaking and would probably be shut down by anyone acquiring the whole company, so it does not count as an asset in most reckonings, unlike BlackBerry’s still-healthy cash pot, worth $2.6bn at the end of August.
Meanwhile, the firm’s problems have mounted even further since it announced disastrous quarterly results a week ago and stepped up the hunt for a buyer. It has now been slapped with a class action lawsuit filed by shareholder Marvin Pearlstein, claiming the company misled investors about its future prospects, particularly by overplaying the competitive capabilities of the Z10, the acknowledged make-or-break device for BlackBerry’s smartphone business. The suit, filed in federal court in Manhattan on Friday, alleges that BlackBerry, then RIM, was misleading when it said it was “progressing on its financial and operational commitments” and that previews of BlackBerry 10 were well received by developers.
BlackBerry did manage to show off a new solution which focuses on the business where it still does have genuine differentiation, the mobile enterprise platforms to support all kinds of smartphones, especially in the BYOD (bring your own device) environments. Awkwardly enough, BlackBerry had to debut its new cloud-based offering at the ITxpo 2013 event hosted by research firm Gartner, which last week warned clients to look for alternative solutions to BlackBerry Enterprise Server because of uncertainties about the vendor’s future – advice which prompted angry response from the Canadian company.
The new offering is a multiplatform cloud-based enterprise mobility management (EMM) system will “enable businesses to easily secure and manage corporate and personal devices”, according to its supplier. It aims to make it easier for corporate IT departments to manage and secure BYOD devices, a key challenge for many companies as employees increasingly rely on their own handsets and tablets at work. BlackBerry is providing mobile device management (MDM), mobile application management (MAM) and security capabilities, and administrators will be able to build a catalog of apps for their staff from the App Store, Google Play and BlackBerryWorld storefronts.
Stephen Bates, head of the firm’s Enterprise Business Unit, bravely ignored the gathering stormclouds and remained upbeat, saying: “BlackBerry is evolving. As the industry has adopted BYOD and mixed mobile environments, we’ve responded with our multiplatform EMM solution. The new cloud-based EMM solution will bring all the benefits of our on-premise offering, which is trusted by more businesses and governments around the world than any other enterprise mobility solution, to customers as a cloud service that lets them easily manage BlackBerry, iOS and Android devices more cost efficiently than ever before.”