BlackBerry's latest revamp: New CEO Chen a big plus, but...

BlackBerry's latest revamp: New CEO Chen a big plus, but...

Summary: John Chen turned Sybase around and sold the company to SAP. But can Chen formulate a new strategy for BlackBerry, which raised $1 billion in additional capital, to return it to past glory?

TOPICS: Mobility, BlackBerry

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.

john chen mug
New BlackBerry CEO John Chen.

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.

BlackBerry's moving parts in its latest reinvention go like this:

  • 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'

Chen said:

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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?
  5. 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.

Topics: Mobility, BlackBerry

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  • Thorsten Heins was a bad decision making machine

    Woe unto thee who follow.
  • Taken seriously

    Chen will be taken seriously by Wall St. and the media. Heins never was.
    Susan Antony
  • No Android

    What is it about Android phones being commodities that you do not understand.
    It would be an epic fail.
    Susan Antony
    • Android wouldn't save BlackBerry, just dilute it

      Agreed: outside of Samsung, no one is making any profit in the Android space. At that point you're just one of hundreds of OEMs as opposed to your own platform.
    • Agreed just look at HTC

      Company makes good phones, some say the HTC One is the best phone on the market or was for a while. Yet it's headed in the same direction as BB. There is no instant salvation in Android. However, teaming with Windows might have a pay off, still a long shot though. The Blackberry brand is currently a negative overall, rebuilding Blackberry as Strawberry or Cantaloupe depending on how nostalgic they want to be will be a long hard road or it may be very short lived.
  • Give the Z10's away

    As they have taken the write-down on the millions of unsold Z10's, the best thing they could do would be to literally give them away to end users/corporates to gain critical mass, as a free upgrade.

    Forget the hardware, and live off the ecosystem - take a look at Amazon here for a lead.
    • What ecosystem

      There isn't any. There's nothing to live off of.
      • Where would be if 100,000 new phones got into the market

        I agree. The phones were written off, and they are depreciating at light speed. You've maybe got an 8 month window before they feel stale.

        Give them away to people and developers for free, completely unlocked and carrier free. The carriers are not doing BB any favors. In Canada one of the large players didn't even want to carry the new models.

        Shift things around, and make all future models unlocked and carrier free also, and go to war with the competition on "contract / carrier freedom".
        • 100,000 phones is nothing

          8.8 million phones is scoffed at. Hardly even worthy of the Monty Python French Guard Taunt.
  • What could BlackBerry do now?

    I am unfamiliar with the details of the current BlackBerry platform (of course I am aware of the brand's iconic status, even if I have never used it).

    What I am wondering is what BB could uniquely offer.

    As as has been often pointed out, going with Android could/would be pointless (and not unique).

    Going with Windows Phone 8 would also make it not unique.

    If BB is not unique, it is 'just another supplier' of an existing platform, so what is the point? Better quality hardware?

    I am interested in seeing some tech suggestions from anyone who is familiar with the current BB platform and maybe with its previous ones.

    (Immaterial disclosure: a few months ago I acquired a WP8.)
  • No room for another mobile OS should be as clear as crystal

    The good thing about an outsider to make painful decisions is that there is much less sentimental influence that affects decisions. BB10 is too little too late for the mobile OS market. Unless there is a new OS that breaks the "touch" paradigm similar to graphic breaking the command line paradigm in the 80's, mobile OS market has no room for another platform. I think that BB will join the Android camp and develop a version of Android with QNS features, similar to what Amazon does. It still has a fighting chance with government and enterprise markets.
  • No offers

    that's what this tells me. BB was practically giving itself to anyone with a dollar in the bank and they got no offers. That speaks volumes. As does the fact fairfax could not get the financing to take the company private. They had to guarantee a profit just to raise 1 billion. if Chen turns this sinking ship around he would be the exec of the century.
    • no offers?

      There are offers with NDA from many including former Apple CEO Mike Scully and organization
      • NDAs

        are not offers. it just allows a "potential" buyer to come in and take a look at the books. The fact so many apprently looked and walked away is the telling part. BB really did not have much choice but to try and right the ship. i wish them luck as competition is good for consumers, but I'm doubtful they can do it. Apple and android are just too strong and they are on their games.
  • There can be more than 3 platforms

    They just need to work on better integration with the "platforms" that people use (Facebook, Twitter, etc.) make a very decent web browser, and find the right niche, like expanding their Enterprise capabilities.
  • They're doomed! Dooooooomed!

    Nothing will stop the death spiral of BB now. I don't care who the CEO is, and if he succeeds in prettying up the financials in the short term to make it attractive to buyers, nothing will change their long term prospects. Too little, too late, too bad!
  • Enterprise?

    Does Windows Phone 8 not have the inside track for the enterprise? But, I suppose, there can be room for another if something good is offered.

    WP8 integrates very well with MS, 3rd-party email services and Facebook (cannot comment on Twitter as I do not use it). In UK at least it already has 10% of the new-sales market.
  • BB joins in law suit.

    This may help. The Rockstar Consortium, a joint venture owned by Apple, Microsoft, BlackBerry, Ericsson, and Sony, have kicked into motion a barrage of lawsuits against a raft of defendants that include Google, Samsung, LG Electronics, HTC, and Huawei. In other words, all big players in the Android market.

    Rockstar bought the patents being used here during Nortel's bankruptcy auction. At the time it was clear that Google understood the value of these patents because the company bid as much as $4.4 billion in order to get its hands on them. Rockstar outbid the search giant with a $4.5 billion bid.

    The lawsuit charges the companies with a number of patent infringements, the most damaging of which may be that Google infringes patents by matching search terms to relevant advertising on mobile devices. This could have a huge effect on Google because the company's game plan with Android relies on giving away the operating system in order to make money via advertising.
  • What about Linux?

    I highly doubt this would happen but I'd love to see a blackberry with Ubuntu for phone/tablet on it.
    • Right, not going to happen

      Absolutely no reason for it, none whatsoever. It doesn't bring anything to the party or fill in a single missing piece.