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8/9/2013
09:26 AM
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BlackBerry Ponders Going Private

Struggling smartphone maker considers privatization strategy to buy more turnaround time.

BlackBerry's leadership has had a change of heart about the idea of taking the company private. Chief executive Thorsten Heins and the company's board are weighing more seriously whether such a move would give the company the time it needs to successfully execute its turnaround strategy.

There are no immediate plans to go private, but "there is a change of tone on the board," according to a source cited by Reuters. Until recently, Heins had remained adamant about remaining a public company. The new tone is a departure from his earlier stance.

The primary benefit of going private would be to get impatient shareholders off its back. BlackBerry's investors have grown surly watching the firm lose 80% of its value over the last few years as the smartphone maker struggles to compete with Apple's iPhone and Samsung's Galaxy-branded devices. The company took a year longer than planned to launch its BlackBerry 10 platform, during which its market share plummeted. The first BB10 devices launched earlier this year but have so far failed to catch on with customers. BlackBerry sold just 2.7 million BB10 devices during its most recent quarter, which was about 40% lower than analysts' and investors' expectations.

[ Blackberry needs a survival strategy -- and fast. Read Blackberry Woes Lead To Job Cuts. ]

"Going private is always appealing in theory because you're no longer beholden to the short-term whims of investors. In practice, of course, the way you go private is being bought by private equity firms that usually have their own agendas and may not keep the current board around," said Ovum analyst Jan Dawson. "So it's a risky bet to signal that you're open to the idea, because you never know where it might lead."

The big question: Who would want to make the investment to take BlackBerry private? Reuters suggests that BlackBerry recently met with Silver Lake Partners, a private equity firm, but the two companies did not discuss buyouts or takeovers. Silver Lake has its own problems right now with Dell.

BlackBerry's track record doesn't help. It has nearly bottomed out in the U.S. and is relying on sales in emerging markets to remain afloat. The bulk of its recent quarterly smartphone sales were of its older BlackBerry 7 handsets outside the U.S. -- the company's new phones aren't catching on. And it hasn't delivered BlackBerry Messenger to the Android and iOS platforms this summer as promised. In order to attract investors, BlackBerry needs a plan.

"In some ways, it would be great for BlackBerry to have a couple of years of being private to turn itself around, but the fundamental problem is that it doesn't really have a plan for doing that," Dawson said. "It hasn't articulated any sort of specific strategy for filling the gap left by falling device revenue. In the absence of a plan to do that, it's hard to see who would want to take them private, because it's hard to see how you're going to turn BlackBerry around at this point."

Heins says everything is on track and that new products are on the way. He continually says the company just needs more time. Many think BlackBerry's time may be up.

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Cara Latham
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Cara Latham,
User Rank: Apprentice
8/13/2013 | 12:46:21 PM
re: BlackBerry Ponders Going Private
Buying more time won't help in the turnaround if there is no clear plan, and it doesn't look like the leaders at BlackBerry have laid out a clear, defined strategy for really addressing the challenges the company faces.
Michael Endler
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Michael Endler,
User Rank: Author
8/12/2013 | 9:07:27 PM
re: BlackBerry Ponders Going Private
Writing, meet wall. After taking more time than it really should have to get BB10 out the door, now Blackberry needs MORE time to execute its turnaround. Given that the company's CEO hasn't said much about where a "turnaround" might head (aside from his prediction that tablets will be obsolete in five years), I'm not optimistic.
TerryB
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TerryB,
User Rank: Ninja
8/12/2013 | 5:19:22 PM
re: BlackBerry Ponders Going Private
I don't think it is. I thought I read Google made changes to core Gmail to be able to win more government outsourcing contracts. I believe MS followed suit but don't know for sure. I am basically talking about the BB Messenger service, which chat/SMS-type applications compete against on other platforms. I just know that was the big seller with Gov way back when smartphones began to appear.
rradina
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rradina,
User Rank: Ninja
8/12/2013 | 4:02:33 PM
re: BlackBerry Ponders Going Private
Regarding BB messaging meeting "higher security standards", is that still true vs. today's competition?
TerryB
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TerryB,
User Rank: Ninja
8/9/2013 | 4:57:55 PM
re: BlackBerry Ponders Going Private
Blackberry is toast and the functionality of phone has nothing to do with it. At our company, we chose to standardize push mail on Lotus Notes Traveler, which supports iPhone, Android and, recently, Win phones. Blackberry has their own pushmail server and I've read no planned changes in that arena.
Besides the support issue of two different pushmail systems, Blackberry is more expensive. The pushmail client license is more expensive and it requires an enterprise data plan. Android and iPhone can both work with Traveler with a cheaper personal data plan. We are talking about $40+ for BB plan and $26 for personal plan.
At our business unit alone I just got done converting some 20 users (out of total of 30-35) away from BB to Android/iPhone. What event would POSSIBLY makes us ever go back? No way the BB phone will ever be that much better Droid/iPhone to make us go back, even if someday Traveler did include BB pushmail support.
The game is over, it's just a matter of time for them. If not for heavy government use, because their messaging met higher security standards, they would already be done.
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