Crippled BlackBerry Drifting Dangerously Close to Corporate Scrap Yard

 
 
By Wayne Rash  |  Posted 2013-10-10
 
 
 

Crippled BlackBerry Drifting Dangerously Close to Corporate Scrap Yard


The question facing Thorsten Heins is a tough one. He was hired to save BlackBerry from near certain death as it sank beneath the onslaught of newer, but not necessarily better, technology.

But he could instead be the CEO who steers this once great wireless company on its final voyage, where it could be beached and cut up for scrap, just like old oil tankers that are broken up on the beaches of Bangladesh.

Ship breaking (or ship recycling, as it's sometimes called by the politically correct) is a nasty business in which ships that can no longer be sailed economically are stripped bare of all fixtures and equipment that can be resold until all that's left is the steel hull that is cut up for scrap metal.

While BlackBerry won't be sent to Bangladesh for recycling, the eventual end for the company's millions of customers and tens of thousands of workers and partners isn't likely to seem much better. If Google, SAP or Cisco gain control of the Canadian wireless maker, the result will almost certainly be the same. The company would be broken up into its component parts, the sum of which may be worth more than the whole.

Of course, that's not the only possible outcome for BlackBerry. The company has already signed a $4.7 billion deal with Fairfax Holdings that would privatize and restructure BlackBerry, but keep it intact, while the company gets the time it needs away from the harsh market spotlight that follows public companies. Fairfax has until Nov. 4 to perform its due diligence before acquiring BlackBerry.

But just because there's a deal on the table doesn't mean that BlackBerry can't be broken up and sold. BlackBerry's Special Committee can decide that that the company is worth more to investors by breaking it up, selling its most valuable parts and then simply shutting down what's left.

Breaking up the company would effectively abandon customers and many employees, if only because the secure networking that BlackBerry has created doesn't require a lot of people to run it. The other part that is most valuable—the company's patent portfolio—doesn't require anyone.

What about the handset business? Taken as hardware, pure and simple, BlackBerry doesn't offer much. A lot of companies make smartphones, after all. And there's really not a lot about BlackBerry's phones that's unique enough to entice a potential buyer to acquire the handset business to keep marketing BlackBerry smartphones.

But is this one instance where BlackBerry may in fact be worth more as a whole rather than just as spare parts? Perhaps. What BlackBerry presents to the world is an ecosystem that provides a secure messaging system that's valuable to enterprise and government users.

 

Crippled BlackBerry Drifting Dangerously Close to Corporate Scrap Yard


The security of BlackBerry Messenger is also valuable to many users, especially people who live in nations that are sufficiently repressive that a means of secure communications is necessary. But despite the value to those trying to escape scrutiny from oppressive governments or any kind of law enforcement agency, there's not a lot of money there. The real money lies with the enterprise, with secure email and with BlackBerry Enterprise Server.

BlackBerry is offering partial access to its secure networking and its related mobile device management to companies that have BES and also use iOS or Android devices. But that's not the same thing as an ecosystem. And while BlackBerry's ecosystem isn't as broad as those based on iOS or Android, it's secure and it's enterprise-friendly. IT departments love BlackBerry even if the users don't think it's particularly cool.

But BlackBerry's ecosystem alone isn't enough to save it from the scrap yard. The Special Committee must decide if it's in the stockholders' interests to keep the company intact with the goal of creating a more focused, leaner and eventually profitable company that has a better chance of competing in the wireless world. Otherwise, it's the job of the Special Committee to maximize stockholder return the best way it can, and that probably means selling the parts of the company it can and shutting down the rest.

The answer to that conundrum depends on how the Special Committee views its charter. If the Special Committee sees its job as simply bringing stockholders the maximum immediate profit, then the company is essentially doomed. BlackBerry will be sold off piecemeal for an immediate return.

If the Special Committee can consider long-term potential benefits as well as what's best for the company's employees who helped build BlackBerry into what had been a very successful enterprise, then it will likely choose to keep BlackBerry intact. But the well-being of employees is rarely a decisive consideration in these situations.

One leader in the effort to keep BlackBerry afloat is one of the company's founders, Mike Lazaridis, who has stated publically that he's been opposed to the choices the company made when it moved to BlackBerry 10 and started pushing touch-screen phones.

Lazaridis reportedly has been trying to put together a bid to buy BlackBerry himself or to buy it in combination with Fairfax. If that happens, CEO Heins is almost certainly to find himself excused from further involvement in the company. But BlackBerry would likely find itself in a niche of its own trying to find a successful path apart from the rest of the smartphone community.

 

Rocket Fuel