BlackBerry announced on Monday that it is beginning the process of becoming a private company in a $4.7 billion deal after failing to regain its once-dominant presence in the smartphone market.
Canada-based BlackBerry announced in a press release that it has entered into a letter of intent agreement for a buyout with a consortium of companies led by Fairfax Financial Holdings Limited. Fairfax already owns 10 percent of BlackBerry shares, but BlackBerry will enter into a "go-shop" period and could accept rival offers.
"We believe this transaction will open an exciting new private chapter for BlackBerry, its customers, carriers and employees," Prem Watsa, CEO of Fairfax said in the press release. "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."
This announcement comes on the heels of preliminary quarterly results from BlackBerry on Sept. 20, when the company said it will lay off 4,500 workers, or 40 percent of the company, "in response to the increasing competition in the smartphone market." The company also expected to report a net operating loss of almost $1 billion in the quarter ended August 31, mainly due to write downs on its unsold phones.
"Going forward, we plan to refocus our offering on our end-to-end solution of hardware, software and services for enterprises and the productive, professional end user," BlackBerry President and CEO Thorsten Heins said in the quarterly results statement.
A sale of the company will likely mean that "investors can monetize the valuable parts of the company and break up and sell the rest," which could include ending the sales of BlackBerry's consumer phones, says Bill Menezes, a principal research analyst who covers mobile communication at technology research firm Gartner.
Fairfax could not be reached be reached for comment.
"[BlackBerry] didn't announce they were going to fire 4,500 of their workers so they could save costs and keep operating the handset business," Menezes says. "The marketplace has spoken and it is not asking for BlackBerry phones."
BlackBerry may survive as a niche business through the value of its patents, its device management system and by seeking customers in emerging markets, says Ramon Llamas, research manager for the mobile phones team at the International Data Corporation (IDC) analyst firm. The comments from Watsa indicate that Fairfax may try to keep the company intact but BlackBerry is likely done trying to compete directly against Apple and Google in the smartphone business, Llamas says.
"[BlackBerry] is looking to cut down their portfolio from six to four devices, which says to me they are moving away from consumer to 'prosumers,'" which include businesses and organizations looking for secure mobile solutions such as the federal government, Llamas said. "Is it going to try to appeal to consumers in the same way that it used to? No."