BlackBerry Takes Investment Over Buyout; CEO Thorsten Heins Stepping Down
November 4, 2013 9:30 AM
John S. Chen -- chairman, CEO and president of Sybase, an independent software vendor -- will take over as BlackBerry's Interim CEO
Many awaited BlackBerry's
big buyout news
today, but it turns out that the company will receive a hefty investment instead -- and this new plan entails the removal of BlackBerry's current CEO.
press release revealed that the company is ditching previous buyout plans and will instead receive $1 billion in funding from Fairfax Financial Holdings Limited and other institutional investors.
"Today's announcement represents a significant vote of confidence in BlackBerry and its future by this group of preeminent, long-term investors," said Barbara Stymiest, Chair of BlackBerry's Board. "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. 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."
Back in September, Fairfax Financial planned to pay $4.7 billion in a BlackBerry buyout, and today was the deadline for that deal after a due diligence period. The deal was to ensure that BlackBerry goes private and that each shareholder receives $9 per share in cash.
However, it looks like that $4.7 billion buyout won't be happening today. BlackBerry and Fairfax Financial must have found a new solution during the due diligence period, and now, BlackBerry's going to take the funding and try to right its wrongs.
But that $1 billion investment won't come without a few conditions. One of the major changes is that BlackBerry's current CEO Thorsten Heins will be stepping down once the deal is completed. John S. Chen -- chairman, CEO and president of Sybase, an independent software vendor -- will take over as BlackBerry's Interim CEO until a permanent replacement is found.
BlackBerry CEO Thorsten Heins
"I am pleased to join a company with as much potential as BlackBerry," said Chen. "BlackBerry is an iconic brand with enormous potential - but it's going to take time, discipline and tough decisions to reclaim our success. I look forward to leading BlackBerry in its turnaround and business model transformation for the benefit of all of its constituencies, including its customers, shareholders and employees."
There will also be some other executive shifts, such as Chen being appointed to Executive Chair of BlackBerry's Board of Directors (in addition to Interim CEO) and Prem Watsa, Chairman and CEO of Fairfax, being appointed to Lead Director and Chair of the Compensation, Nomination and Governance Committee.
David Kerr (on BlackBerry's Board of Directors) will resign from the Board at the closing of the transaction along with Heins.
BlackBerry is a sinking ship, but it hasn't always been that way. The company was once a big player in the mobile gadget realm with its popular BlackBerry smartphones and OS -- especially for the business folks.
But in recent years, competitors like Apple and Samsung have stolen BlackBerry's spotlight and a significant amount of its market share in both the consumer and corporate/government markets. In 2011, BlackBerry had 14 percent of the U.S. smartphone market, and now, it has less than 3 percent.
This means that BlackBerry's wallet is taking a big hit. The company reported a loss of $84 million in the quarter that ended June 1, as well as a decrease of 4 million subscribers. In September, it expected a GAAP
net operating loss
of $950 to $995 million, and a cut of 4,500 jobs. As of March, BlackBerry had 12,700 employees.
BlackBerry's board of directors announced the formation of a Special Committee to
explore strategic alternatives
back in early September to enhance the value and accelerate the development of BlackBerry 10 (BB10) -- the company's latest operating system and line of devices that launched in January. The announcement came only a few days after a
that BlackBerry might go private in an attempt to fix its problems away from the public.
BB10 was supposed to save the company earlier this year, but it didn't take off the way BlackBerry expected. Both BB10 hardware releases -- the Z10 and Q10 -- have largely flopped. T-Mobile even took BlackBerry devices off of its shelves. It's releasing the high-end
Z30 flagship BB10 phone
, but many believe the results will be no different.
"A lot of people pay zero for the cellphone ... That's what it's worth." -- Apple Chief Operating Officer Timothy Cook
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