BlackBerry (BBRY) says it has a plan to be acquired by a group led by Fairfax Financial in a $4.7 billion deal. Fairfax already owns 10% of the troubled Canadian smartphone maker. Prem Watsa, CEO of Fairfax, is a former BlackBerry board member. He resigned from BlackBerry’s board this summer after the company said it would evaluate strategic alternatives.
Fairfax will contribute its shares to the transaction, which will pay BlackBerry shareholders $9.00 a share in cash. BlackBerry and the Fairfax consortium have signed a letter of intent, but the transaction is subject to due diligence, which is expected to be complete by November 4. During the due diligence phase, BlackBerry will be making deep cuts in its workforce. The company plans to lay off 4,500 of its roughly 11,500 employees.
Watsa said the new private company will focus on “delivering superior and secure enterprise solutions to BlackBerry customers around the world.” Those solutions will not be limited to hardware. The company’s recent smartphone releases have not sold well and going forward BlackBerry is likely to devote significant resources to software and services, such as its Mobile Fusion enterprise security platform.
“The company’s device sales are cratering, and its announcement last week that it no longer intends to pursue the consumer market is essentially the death knell for this business,” said Jan Dawson, chief telecoms analyst at Ovum. “BlackBerry’s supply chain relies on scale for profitability, and it will never again be able to achieve the scale necessary to make money on devices. It’s likely that BlackBerry will be out of the device business entirely by the middle of next year.”
Just five years ago, BlackBerry (fomerly RIM) had 53.6% of the U.S. smartphone market. The company did not immediately implode when the iPhone was launched in 2007; in fact its market share continued to grow for several months. But as consumers converted to touchscreen phones, and started bringing them into the workplace, BlackBerry failed to keep pace. BlackBerry’s U.S. market share is now 3%, and its worldwide market share is even lower.
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Image courtesy New York Daily News.
