Blackberry 10 launch

Struggling BlackBerry Eyes Sale, Other Options

Aug. 12, 2013
Some analysts said prospects look grim for the smartphone pioneer.

OTTAWA - Troubled smartphone maker BlackBerry (IW 1000/412) said Monday it is examining "strategic alternatives," which could involve putting itself up for sale.

The Canadian firm said it had formed a committee to consider "possible joint ventures, strategic partnerships or alliances, a sale of the company or other possible transactions."

The announcement comes with BlackBerry marginalized in a smartphone market dominated by makers using the Google Android operating system and by Apple's iPhone.

Some analysts said prospects look grim for the smartphone pioneer.

"It looks like we are approaching the end of the road for BlackBerry," said technology analyst Jeff Kagan. "They are looking for the next alternative. Apparently they are simply not selling enough new devices."

A statement issued by BlackBerry said the board's committee would seek ways "to enhance value and increase scale" to help deploy its products based on its new BlackBerry 10 platform, which was launched only seven months ago.

"We continue to see compelling long-term opportunities for BlackBerry 10; we have exceptional technology that customers are embracing; we have a strong balance sheet; and we are pleased with the progress that has been made in our transition," said President and CEO Thorsten Heins.

The special committee of the board includes Heins, Barbara Stymiest, Richard Lynch and Bert Nordberg, and will be chaired by Timothy Dattels.

Board Member Resigns

Prem Watsa, chairman and CEO of Fairfax Financial, said he would resign from the board due to potential conflicts that may arise during the process. Fairfax Financial is the largest BlackBerry shareholder.

According to International Data Corp. (IDC), BlackBerry's global market share had slipped to 3.7% in the second quarter, the lowest since tracking began, while Android accounted for nearly 80%.

While BlackBerry helped create a culture of mobile users who were glued to the company's smartphones, many of those customers have since moved to Apple (IW 500/4) or other smartphone makers such as Samsung (IW 1000/14), mainly using Android.

In the second quarter, Android and Windows-based smartphones both managed slight increases in shipment volumes while Apple posted a year-over-year decline. However, Apple is expected to recapture market share with a new iPhone and operating system coming out later this year, according to analysts, while BlackBerry is forecast to continue trailing the pack.

In a turnaround bid, the company unveiled its new platform on Jan. 30, as it dropped the corporate name Research in Motion to rebrand as BlackBerry, but staggered sales launches across regions.

The Z10 touchscreen smartphone was only launched in the key U.S. market in March while the Q10 phone with a physical keyboard followed after the end of the first quarter.

Kagan blames BlackBerry's fall on a failure to create "a strong public relations and advertising image to support the brand" early on. Furthermore, he says, the company alienated its existing users who wanted the same features and functionality of their old phones, plus new features, in a new phone, but instead got an entirely new and different operating system aimed at attracting new customers.

Epic Fail or More Time Needed?

Several outages in recent years also left many users "unhappy with the service," added Joe Rundle of ETX Capital, saying the company's turnaround strategy "has failed epically."

But IDC analyst Ramon Llamas said the company just needs more time to "evangelize more users."

If the company is sold, the question then becomes to whom.

"We believe that there are few potential suitors," said analysts at Credit Suisse.

Rundle noted that "struggling sales, unsuccessful strategy and boring products means buying BlackBerry could be a fatal move for any rival."

He noted that BlackBerry's security network and a number of its patents are attractive selling points but would-be buyers are scarce.

More likely is a joint-venture or a bid by social networking site Facebook looking to launch a handset or online retailer Amazon seeking to expand its position following the success of its Kindle tablet, Rundle speculated.

Microsoft, Huawei, or private investors also have been touted as possible suitors.

However, Rundle added, "It's more likely we may see the company go private as it gives management some breathing space to repair finances and implement a stronger strategy that matches up to its peers."

Copyright Agence France-Presse, 2013

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