BlackBerry has found a lifeline by raising $1 billion in capital to fight another day, nixed talk of a breakup and installed a well known CEO in the mobile world to execute a strategy so the company can survive.
The big questions about BlackBerry remain: Can the company stem enterprise defections? Can BlackBerry devices still sell? Can BlackBerry go back to being an enterprise first company? Is it too late?
Answering those questions will be John Chen, BlackBerry's new CEO replacing Thorsten Heins. Chen was CEO of Sybase. At Sybase, Chen navigated the company away from databases and into mobility. Ultimately, Sybase was sold to SAP and remains a key part of the application giant's growth strategy.
- Fairfax Financial, which ended a death spiral for BlackBerry by establishing a floor on price, won't buy the company outright. Instead, Fairfax will lead a $1 billion convertible bond transaction to raise capital. Fairfax will buy a quarter of those bonds with institutional investors acquiring the rest.
- The bonds convert at $10 to almost guarantee a return for shareholders. At the very least, the return on investment bar is low.
- Chen becomes CEO. Prem Watsa, CEO of Fairfax, will be lead director.
BlackBerry's strategic review is complete. The review board decided it was better to raise capital and strengthen than break up into parts.
Also: In BlackBerry's letter to customers, a stiff upper lip | BlackBerry tries to hold enterprise software, services fort; Customers wary | BlackBerry execs pitch enterprise customers: 'BlackBerry is here to stay'
BlackBerry is an iconic brand with enormous potential - but it's going to take time, discipline and tough decisions to reclaim our success. I look forward to leading BlackBerry in its turnaround and business model transformation for the benefit of all of its constituencies, including its customers, shareholders and employees.
While these moves---notably the installation of Chen---could be seen as a positive BlackBerry's latest effort may not eliminate the uncertainty surrounding the company.
A few thoughts:
- Enterprise buyers are still going to take a wait-and-see approach with BlackBerry. BlackBerry has a solid mobile device management strategy and could do well. The problem is that $1 billion in capital and a new CEO won't make it easier to pitch BlackBerry wares to higher ups.
- How iconic is the BlackBerry brand? BlackBerry's brand could be seen as a liability in the device world. The failure of devices like the Z10 to get traction illustrates how BlackBerry may be a brand of the past.
- The BlackBerry 10 platform will have to be evaluated. Chen will have a fresh view of BlackBerry and he'll have to ponder whether BlackBerry should do something more dramatic---like go with Android.
- It's no lock that Chen can stop the BlackBerry spiral. Chen noted that BlackBerry's turnaround will take time. How much time does the company really have even if it has a strong balance sheet?
- How much corporate intelligence did rivals glean from poking around BlackBerry's books? Everyone from Lenovo to Samsung has been reportedly looking at BlackBerry. These rivals now know BlackBerry's weak spots a little better.
Bottom line: BlackBerry will fight on, but it has sustained serious damage. Chen has a big challenge ahead.