BlackBerry cancels plans to go private, replaces Thorsten Heins with John Chen as temporary CEO.
BlackBerry Monday reversed the course it set several months ago to go private with the help of equity investors. Instead, it shook up its management and welcomed a $1 billion infusion of cash. Where it goes next, though, is anyone's guess.
Monday marked the deadline for Fairfax Financial Holdings to make good on a $9-per-share, $4.7 billion deal to take BlackBerry private. That didn't happen. The company couldn't convince other investors to join it in an effort to purchase BlackBerry. Fairfax was, however, able to come up with some cash -- together with a few other investors, the company today announced a $1 billion investment in BlackBerry in a bid to strengthen the company as it changes direction yet again.
Under the terms of the deal, BlackBerry has agreed to make changes to its leadership. For starters, CEO Thorsten Heins is out. He'll officially resign once the deal is approved and closes, which is expected to take about two weeks. In his place, Fairfax and the BlackBerry board will install John S. Chen, who will serve as temporary CEO while the company searches for a new chief. Further, existing board member David Kerr will step down and Fairfax CEO Prem Watsa will assume the role of lead director and chair of the compensation, nomination and governance committee.
Heins has served as BlackBerry's CEO since January 2012. He was put in place when former co-CEOs Mike Lazaridis and Jim Balsillie stepped down and left the company. Heins oversaw the development of the BlackBerry 10 operating system; the Z10, Q10, Q5 and Z30 smartphones; and BlackBerry Enterprise Server 10. Unfortunately, none of these products has sold as well as BlackBerry hoped. The company has announced massive layoffs, numerous financial restructurings and other changes.
Of Heins, BlackBerry's board said, "[We] would also like to thank Thorsten for his service to BlackBerry over the past six years. Under his leadership, BlackBerry established a more efficient cost structure, developed new products, saw the adoption of BES 10 and delivered the BlackBerry 10 platform. These are all significant accomplishments. We are grateful for his contributions and wish him well in his future endeavors." It must be a somewhat bitter farewell for Heins, who stood to make $50 million in the original deal with Fairfax. Now it appears his golden parachute will be much smaller, at just $22 million.
Something big, however, is missing from BlackBerry's latest news: An actual strategy.
Avi Greengart, Current Analysis analyst, put it succinctly: "BlackBerry 'concludes review of strategic alternatives' without actually choosing an alternative strategy."
The entire purpose of its three-month journey to find a buyer was to reassess the company's focus and direction. The press release published by the company today doesn't really shed any light on where it is now headed.
"The BlackBerry Board conducted a thorough review of strategic alternatives and pursued the course of action that it concluded is in the best interests of BlackBerry and its constituents, including its shareholders," said Barbara Stymiest, chair of BlackBerry's board. "This financing provides an immediate cash injection on terms favorable to BlackBerry, enhancing our substantial cash position. Some of the most important customers in the world rely on BlackBerry and we are implementing the changes necessary to strengthen the company and ensure we remain a strong and innovative partner for their needs."
In other words, BlackBerry is hoping to cling to life for at least a while longer. BlackBerry didn't address its handset plans, operating system plans, consumer/prosumer targeting plans or how it intends to remain relevant in today's world of iPhones, Androids and Windows Phones. These are things it needs to do -- and soon.
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. We've got a management crisis right now, and we've also got an engagement crisis. Could the two be linked? Tune in for the next installment of IT Life Radio, Wednesday May 20th at 3PM ET to find out.