Fairfax Deal Falls Through – Blackberry on the Skids?

Sometimes I really hate it when I’m right…

The clock has been ticking for Blackberry for quite some time, and today, the alarm went off. You know, I really feel bad. I really do. I hate it when I’m right, but some things really just can’t be helped.

I’ve been down on RIM/Blackberry for quite some time. I’ve been calling for them to see the writing on the wall since late 2011. Its seems now, they actually do know “for whom the bell tolls.” This time, it tolls for Thorsten Heins as Blackberry ousts not only him, but many of its senior directors as well in a last ditch effort to salvage some value out of the organization before it’s too late.

The buy-out by Fairfax Financial isn’t going to take place, and that’s really too bad. It was, in my opinion, Blackberry’s last, real chance to maintain any of its identity. Instead of the buyout, which would have been a nearly $5.0B deal, Fairfax is going to try to raise about $1.0B by selling convertible notes in a bid to stabilize the organizations shrinking operating capital. Recently, the company reported a quarterly loss of about $1.0B and burned through an additional $500M in cash.

Sybase’s former chairman and chief executive of its enterprise technology firm, John Chen, will take over as CEO and as chairman of its board. Fairfax’s CEO, Prem Watsa will act as lead director and the chair of Blackberry’s compensation committee. There are specific, unspecified conditions that must also be met for the deal to close, which also includes approval from the Toronto Stock Exchange.

Trading of Blackberry shares was briefly halted, prior to the Nasdaq actually opening, as they lost nearly 21% in premarket trading. As of 2 PM EST, BBRY shares were still down 1.28 to 6.49.

wake up blackberry

After the operating capital is secured, I’m not certain what Blackberry’s Plan B moves are. However, if they’re smart, those moves should include finding some kind of buyer for their IP before it becomes completely irrelevant. Blackberry’s security technology is great for mobile email, but many of its current customers are moving to other solutions as they weren’t able to make their latest OS gain any traction with the consumer market and have only had mild success in the enterprise market. Divesting the organization’s assets seems the only real alternative for them to get any return on their investor’s money… before the world completely moves on.

 

I’ll be following this in the coming days and weeks to see if and what John Chen decides to do with the organization. Please watch Soft32.com for updates.

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