In its later years, BlackBerry/RIM has been characterized by a desperate refusal to face up to the full extent of the collapse of its traditional business. This was perhaps understandable when the firm was still headed by its co-founders, who sometimes behaved like over-indulgent parents refusing to acknowledge that their child had dropped out of class.
But among many errors, one of the company’s critical ones was to appoint an insider to be the turnaround CEO, when it was clear that someone with an outside view and no BlackBerry history was required ‘ and preferably one who could effect a takeover before the market value slumped further, before the cracks in the BB10 strategy were seen. Before a fire sale, or worse, a complete failure to sell, became the only outcomes. Thorsten Heins, in emulating his predecessors’ sunny lack of realism, was not that CEO.
Perhaps John Chen is. He did a mighty job at Sybase and reinvented the apparently dying database provider as a mobile enterprise giant, and he is now brought in as BlackBerry’s interim CEO after the abject failure to sell the company. But surely it is too late.
The array of big names which were rumored to be interested in buying BlackBerry ‘ Microsoft, Qualcomm, Oracle, Samsung, Cisco, even Sybase’s eventual parent SAP ‘ have melted away and the firm is left with a $1bn loan from its largest shareholder, Fairfax Financial Holdings, which itself failed to raise the money for the full takeover it wanted.
Chen has track record for turning around failed companies and he understands the mobile enterprise market, the heartland to which BlackBerry has to return to have any chance of survival. One of Heins’s mistakes was not to admit defeat in the mainstream smartphone world and concentrate on building on the remaining loyalty in large corporations and government departments ‘ if not to the iconic handsets themselves, then to BlackBerry Enterprise Server and the messaging frameworks, which have been effectively updated for a BYOD and social networking world.
However, he will have little time left before the cash runs out, and though a strong niche does look achievable for BlackBerry in the enterprise, it would certainly be carved out more easily with the funds of a successful parent such as IBM or Oracle behind the company. Perhaps Chen’s best hopes will rest on cultivating partnerships with such giants, slashing costs mercilessly while continuing to invest in the back end platforms, and then look for a purchaser once he has reinjected some value into the vendor.
So far, he is denying that he is just building BlackBerry up for another round of hawking the company around, and is not even committing to closing the handset business, though surely this is inevitable. However, in his first comments at the helm, Chen dismissed the idea of dumping handsets “ridiculous”. He was clearly eager to dampen down galloping speculation and give himself breathing space to make the difficult decisions ‘ for instance, cautioning that ‘jumping to anything is inappropriate’ when asked about a possible move to Android. But in talking up the “need to preserve the reason why BlackBerry is around’ he was in danger of echoing his predecessors, harking back to past glories while the market desperately waits for some decisive new thinking. And the need to move away from hardware was hinted at in other remarks ‘ Chen said he would likely seek a permanent CEO who had expertise on the services and software side.
He insisted there was still a business to turn around for the long term, not just a quick sale. ‘I’m not going to look for somebody to do a deal,’ he told Bloomberg. ‘I’m going to focus on making the business better. There are lots of assets in the company, and there are some really good things happening, and we need to find a way to broaden it, monetize it and serve the market a little better and more aggressively.’ Of course, he has to say that, rather than imply he is desperate for a bidder, but he must not fall into the trap of all his predecessors of failing to set out a clear plan, rather than promising everything to everybody. So far, he is not offering any details, but would not rule out closure of the handsets unit.
On Tuesday, Heins stepped down when BlackBerry announced that Fairfax had abandoned its US$4.7bn takeover plan, having failed to secure the necessary funding. The Monday deadline expired without other bids materializing. Fairfax will now, instead, provide 25% of a $1bn injection of fresh loans funding. Chen took over as interim CEO while BlackBerry seeks a full time chief, but the markets will be hoping the interim period is a long one.
BlackBerry currently has a market value of around US$5bn and also has about US$3bn in cash and equivalents. The fresh funding will lift its cash to around $4bn, buying a little time for Chen and his successor to turn things around.
“The BlackBerry Board conducted a thorough review of strategic alternatives and pursued the course of action that it concluded is in the best interests of BlackBerry and its constituents, including its shareholders. This financing provides an immediate cash injection on terms favorable to BlackBerry, enhancing our substantial cash position.” said Barbara Stymiest, chair of BlackBerry’s board.
Unfortunately, it sounded like another piece of desperate optimism. She couldn’t say anything else of course, but the fact is that BlackBerry, and its fabled brands and frameworks, was available to buy at a knockdown price, and nobody bit, except an investment firm which couldn’t get a deal together. Chen, if he stays around long enough, may rescue a smaller business and perhaps sell that later after he has done the hard work of breaking up the firm and closing down the failed smartphone business. But BlackBerry as we know it will surely disappear.