BlackBerry has agreed a deal in principle with Fairfax Financial for the sale of the company for $4.7bn (£3bn).
The beleaguered manufacturer announced last month that it was considering a sale, and a news release last night confirmed it had signed a ‘letter of intent agreement’ with the Canadian financial holdings organisation. The valuation of BlackBerry reveals a catastrophic decline in fortunes for the company which was valued at $50 billion in 2008.
The smartphone maker announced last week that it was laying off 4,500 employees – 40% of its staff – and yesterday revealed it was expecting it make almost $1bn loss in Q2 2014. BlackBerry has added it is not exclusively in talks with just one company, however, a statement releases last night said: ‘Diligence is expected to be complete by November 4, 2013. The parties' intention is to negotiate and execute a definitive transaction agreement by such date.’ The deal is expected to take BlackBerry off the stock market as a private company.
Fairfax’s chairman and chief executive, Prem Watsa, said: ‘We believe this transaction will open an exciting new private chapter for BlackBerry, its customers, carriers and employees. We can deliver immediate value to shareholders, while we continue the execution of a long-term strategy in a private company with a focus on delivering superior and secure enterprise solutions to BlackBerry customers around the world.’
Industry insiders were quick to give their views on the possible takeover, with the general consensus making BlackBerry a private firm won’t eliminate its problems. Ben Wood at CSS insight said: ‘Private ownership will provide breathing space as strategic options are assessed. Early indications suggest a focus on the business market. Wider structural changes such as spinning off BlackBerry Messenger (BBM) and retrenching from hardware will likely be carefully reviewed.
‘Irrespective of this bid, questions around BlackBerry’s future remain unchanged. It seems unlikely it can continue as it is and while the most attractive option is to focus on business users, tough decisions will need to be made about which parts of the business to persevere with and which pieces to spin off or abandon.’
Jan Dawson, chief telecoms analyst at Ovum, added: ‘Normally, companies are taken private in order to give a long-term strategy time to payoff without the hassles of short-term investor scrutiny. But BlackBerry's key problem for the last couple of years has been the lack of such a long-term strategy. It simply hasn't articulated a way to rebuild its business as its device sales drop precipitously. Unless Fairfax plans to radically change or accelerate BlackBerry's strategy, it's unlikely to be able to turn the company around. And that means we're likely seeing the beginning of the end for one of the most iconic brands in mobile technology.’
Author: Matthew Campelli