BlackBerry 'mulls going private' to fix problems amid turnaround blues

BlackBerry 'mulls going private' to fix problems amid turnaround blues

Summary: The smartphone maker is considering pulling out of the stock market and going private in a bid to fix its problems. It could be just what the company needs to secure further investment for its BlackBerry 10 platform. Or, it could pave the way to a split-up and sell-off.

TOPICS: BlackBerry
BlackBerry chief executive Thorsten Heins asked for patience during the company's turnaround. (Image: CNET)

For a while last year, almost every week it seemed there were reports and rumors that BlackBerry, which at the time was in a less than ideal financial situation with tepid outlooks forecasts, was fielding buy-out offers from rivals and competitors.

On Friday, sources speaking to Reuters said the company and its board is "warming up" to the idea of pulling itself from the stock market in efforts to give it some "breathing room" to fix its problems out of the public eye.

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BlackBerry Q1: Recovery, turnaround not going so well

BlackBerry Q1: Recovery, turnaround not going so well

BlackBerry's recovery hopes are losing promise, after its first-quarter earnings missed analyst expectations by a long shot.

No decisions have been made yet, but the "change of tone" on the board could signal a bid to drum up cash by private equity firms and investors to buy the company back from its shareholders.

The Waterloo, Ontario-based company declined to comment to Reuters. 

It could be just what BlackBerry needs to ground itself for the coming quarters. But the road to success will not be as straight forward as drumming up the cash and plowing on.

The company's financial situation isn't bad in the short term. In the long run, however, to sustain its business amid declining revenues and profits year-over-year, it will have to start chipping away at its cash pile. BlackBerry has so far managed to reduce dipping into its corporate savings by way of redundancies. But as non-essential staff to BlackBerry's latest smartphone push slowly melts away, it will begin to run out of human capital to cut.

For its fiscal first quarter earnings, which ended June 1, BlackBerry posted a loss of $84 million, or 16 cents a share, narrower than its $518 million, or 99 cents a share, on the same quarter a year earlier. 

One analyst called the results a "complete disaster," after the firm failed to hit a single positive note on any of its reported financial metrics. In spite of the loss, things are better a year later.

BlackBerry's strategy involved putting all its eggs in its next-generation BlackBerry 10 basket, which included a range of smartphones and devices, and a brand new platform.

BlackBerry 10's debut with the touch-screen Z10 was matched with launch, albeit delayed, of the keyboard-enabled Q10. The cheaper Q5 will help target a specific, low-end and developing market, while a high-end touch-screen A10, which our sister site reported on exclusively in June, is understood set for a November release.

But uptake in the devices have been tepid at best. For its first quarter earnings, BlackBerry sold 2.7 million new BlackBerry 10 devices, showing that older BlackBerry 7 devices outsold its newer range of smartphones.

Short term, the company's strategy aims to pull itself back from the brink of collapse. While BlackBerry's core following remains faithful, it remains unclear if the company's dwindling base of hardcore users has been offset by an rise in newer BlackBerry 10 users. 

Above all else, convincing private investors that it has a future in selling smartphones and solutions to enterprise and business customers will be the tough sell. BlackBerry's smartphone sales may not be much to jump and shout about, but it has a healthy patent and intellectual property portfolio, a data infrastructure, and remains the most popular provider of end mobile device management and secure mobile device services to governments — even if that is "for now."

Topic: BlackBerry

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  • Q2 uptake

    The answer could be found in the uptake after Q1. If you check Netmarketshare's data for June and Juli you see 37% and 42% increase in marketshare. My guess is that the Q10 has been selling quite well when it was introduced after the earnings report.
  • Because that strategy worked so well at Dell

    RIP BB
    I'm so thankful for the bliss I enjoyed from BB. However it's time to carry on and leave that sinking (sunken) ship.
    • It hasn't worked for Dell yet

      because Carl Icahn is trying to step in, likely to raid the company.

      Does BB have anything Icahn wants? Besides, it's in CA, so they could be safe from him should they try it.
      William Farrel
  • Insanity

    Blackberry's problems are not ownership, they are core product and tanking market share.

    My solution

    - Exit Hardware, immediately -0 it is a financial black hole
    - Deliver paid for BE full fat client/BBM as a cross-platform App for IOS, Windows Phone, Android
    - Deliver free lite BES/BBM Client/BBM for Playstation, Wii, DS, XBox, Kindle, Windows, OSX, Linux
    - Sell QNX to a more worthy owner

    ...rake in the dosh, as the money is in subscriptions and the BES back-end. You are floundering in hardware.
  • time to sell stock for sure as time will run out to do so!!

    cash it all in as if this is true, this means they are trying to sell the company and need to regroup but the stock right now just passed it average volume of 23 million shares... plus laying off all the top executives in bb 10 launch i believe 12 of them left and 250 employees also were let go... so its only a matter of time that someone will buy the patents and selling the company off... i would say by the end of the year, there wont be a blackberry... so that would suck for bb 10 owners and this might give business a more closer look at a iphone,android or even a Windows phone purchase and leave blackberry behind...
  • BBM is the crown jewel

    And QNX.

    I think a caretaker business for the phones would be prudent, as they are secure, popular in the developing world, and popular with those who want keyboards... but separate the QNX and BBM and you'd have another star company.
  • the current

    Investment structure ( advanced by Wall Street controlled Congress) puts short term gains ahead of all other considerations. Companies like Dell and BB look to go private so they can pursue a turnaround plan that is not dependent on gaming the quarterly earnings reports.