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.
"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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