A day after BlackBerry's announcement that it was signing a letter of intent to be taken private by investors, there are questions about the impact this move could have on the company's position. Does an acquisition make current and future customers more or less skittish about buying BlackBerry products and services?
The Waterloo, Ontario-based phone maker said Monday it had agreed to a letter of intent by Canadian investment firm Fairfax Financial Holdings to purchase the company's stock for $9 per share in cash. Fairfax owns about 10 percent of BlackBerry, and is led by Prem Watsa, a former member of BlackBerry's board.
The letter is not a purchase agreement, and gives Fairfax until Nov. 4 to complete due diligence. During that period, Fairfax will more thoroughly investigate BlackBerry's situation and will seek to raise financing, while BlackBerry is free to accept other offers, although it would have to pay a fee of about $150 million to Fairfax if the handset maker breaks off negotiations.
A key question is whether this due diligence period is giving BlackBerry's customers and would-be customers cold feet about making or continuing to make a purchase decision in a platform that is clearly in a transitional phase.
Charles King, an analyst with industry research fund Pund-IT, told us that, if he were an IT manager, this news might make him "more comfortable with BlackBerry because of an infusion of capital" toward which the company appears headed. He also added that the long-term stability of the company "could come down to whether it can be run in a profitable manner in a niche," such as the narrower direction that Fairfax appears to be encouraging.
In a statement accompanying the announcement, for instance, Watsa said that an acquisition by his company would continue "the execution of a long-term strategy in a private company with a focus on delivering superior and secure solutions." The statement indicates a retrenching around the company's traditional business base of customers, with less or even no emphasis on the consumer market. It does not, however, specifically mention handsets.
Consumers, Other Questions
As for consumers, King said he didn't think the announcement "would have an enormous effect on consumer users," who, to the extent that they're paying attention to the news, are simply interested in knowing if the device they're purchasing is facing a near-term end of life. That doesn't appear to be the case with BlackBerry, at least not for the moment.
There are also other questions that could affect the perception of BlackBerry's stability and future, and thus customers' perceptions. For instance, there are reports that BlackBerry co-founder Mike Lazaridis, who left as co-chief executive in 2012 as the company struggled, may become involved again as an investor. This raises the question of whether the return of ex-management will give the company an appearance of a fresh start.
Additionally, Fairfax is not committed to $9 a share, a drop even from the $10.52 per share the company was getting last Thursday, prior to a Friday announcement that it was laying off 40 percent of its workforce. After completing due diligence, Fairfax can lower its current offer, which could affect external perceptions of the company's financial viability.
Another big issue is what exactly a suitor is looking to buy. Some analysts are speculating that any investor is not really interested in the BlackBerry 10 ecosystem of devices. Instead, this thinking goes, investors want the company's patents, its $2.6 billion cash-on-hand as leverage for the financing, possibly its mobile management software that can manage iPhones and Android devices as well as BlackBerry devices, and perhaps its BlackBerry Messenger Service.