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BlackBerry Signals It Will Keep Its Smartphones

BlackBerry Signals It Will Keep Its Smartphones
By Barry Levine

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John Chen, who will serve as executive chairman of the Board as well as interim CEO of BlackBerry, said it would take as much as 18 months to turn the company around, but that there were "enough ingredients to build a long-term sustainable business" around its smartphones. Chen has replaced Thorsten Heins as interim CEO at BlackBerry.
 


What now for BlackBerry? That's the question, following Monday's news that the beleaguered smartphone maker has ended its quest for a buyer, accepted a $1 billion cash infusion, and brought on a new, interim CEO.

The pending purchase by Fairfax Financial Holdings of Toronto for $4.7 billion has been discarded, as apparently have a variety of discussions with such potential suitors as Lenovo or LG. Fairfax had been engaged in a due diligence period which ended Monday. Thorsten Heins, who became CEO in January of last year and oversaw the company's launch of its new BlackBerry 10 platform, has resigned, and John Chen, who turned around Sybase over a decade ago before it was purchased by SAP, is now heading BlackBerry.

BlackBerry said Chen would remain interim CEO until a new, permanent CEO is found. Fairfax Chairman and Chief Executive V. Prem Watsa will once again join BlackBerry's board as lead director, a position he resigned during the summer to avoid any conflict of interest.

'Enough Ingredients'

Chen, who will serve as executive chairman of the Board as well as interim CEO, has told Reuters news service that it will take as much as 18 months to turn the company around, but that there were "enough ingredients to build a long-term sustainable business" around its smartphones. A key question, heightened by Monday's news, is whether BlackBerry would opt for abandoning its devices business altogether and focus entirely on software and services, such as its popular BlackBerry Messenger service or its mobile device management platform.

It's not yet clear what role Fairfax will play in this new phase. BlackBerry has not specifically said how the $1 billion infusion will be used, but the company is known to be sitting on $2.6 billion in cash and investments without Fairfax. The $1 billion, reportedly provided by a capital pool financed by five unnamed firms, is made available through debt securities and can be turned into common shares at $10 each.

'Devices Are Staying'

Ramon Llamas, research analyst with IDC Mobility, told us that, based on Chen's comments, it appears that "devices are staying in the foreseeable future" for BlackBerry. He added that he would "have a hard time" seeing BlackBerry de-emphasize devices, at least because they help the company demonstrate its services.

He said other takeaways from Monday's news include the fact that the company will "remain intact," at least for now, instead of having its parts sold off. As with most companies, Llamas said, "the whole is greater than the parts" at BlackBerry.

Additionally, Llamas said BlackBerry device owners now have a temporary "sigh of relief" that the company is moving forward, at least for the next few months. This movement could help stabilize its still-considerable customer base, he said, not the least of which is the U.S. government.

But the main questions, he said, revolve around the fact that Chen is an interim CEO, which raises issues of how much "weight and authority" he has, so that he can provide the strong leadership the company needs.

Until that is resolved, Llamas said, BlackBerry is "in the waiting room, a holding pattern."
 

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