The decision by BlackBerry’s board of directors to strike a special committee to explore “strategic alternatives” for the company, including a possible sale, should come as relatively little surprise. Fourteen months ago, the company then known as Research In Motion Ltd. revealed it had hired two investment banks, including J.P. Morgan (who is still advising the company), to undertake a similar strategic review. However, analysts said at the time that a buyer was unlikely to emerge until BlackBerry’s much-delayed next-generation operating system, BB10, had been successfully launched and the company’s prospects had stabilized.
Only one of those two conditions has so far been met. The new BB10 phones hit store shelves earlier this year with several novel features. They include an OS that allows users to move seamlessly between applications and software that improves the experience of typing on a touchscreen. BlackBerry has also touted the technical underpinnings of BB10 since it’s built on a software platform previously used in automobiles and other industrial applications. But none of it has done much to excite consumers. The company’s once-dominant share of the smartphone market continues to slide amid stiff competition from likes of Apple and Samsung. Recent numbers from research firm IDC showed BlackBerry’s OS with a mere 2.9 per cent of the market, less than the 3.7 per cent share now enjoyed by Windows-powered devices. Apple, meanwhile, has a 13.2 per cent share of the global market, while devices running Google’s Android system boast a nearly 80 per cent share.
The question, then, is who would be willing to buy BlackBerry now? The company reportedly explored the idea of going private last year with the help of private equity firm Silver Lake Partners, but was unable to agree on a valuation of the company. More recently, Reuters reported that BlackBerry CEO Thorsten Heins and the board were warming up to the idea of a going-private transaction, which would give BlackBerry more freedom to retool its business model without pressure from analysts and investors.
It’s also possible RIM could be scooped up by a rival software or hardware company. Microsoft has long been rumoured to be a potential buyer, although it now seems committed to its partnership with Nokia. Earlier this year, the market was also speculating on interest from Chinese computer-maker Lenovo, but no deal emerged. Other suitors could include Samsung or Amazon. However, the track record for strategic purchases of struggling smartphone makers has left something to be desired. Hewlett-Packard’s purchase of Palm for $1.2 billion three years ago went nowhere, while Google’s purchase of Motorola for $12. 5 billion in 2011 has yet to yield any significant consumer breakthroughs.
Another key question is whether Ottawa would attempt to block a purchase of BlackBerry by a foreign company, as it did with BHP Billiton’s proposed $39 billion takeover of Potash Corp. three years ago. Once the cornerstone of Canada’s tech sector, the BlackBerry brand has fallen so far out of favour with consumers (and voters) that it’s difficult to imagine Prime Minister Stephen Harper’s Conservative government taking a stand on any transaction. Plus, it would be extraordinarily difficult for the federal government to explain why it’s reportedly wooing Verizon Communications north of the border, in a bid to increase competition in the wireless sector, but is against the idea of allowing a foreign company to buy a maker of smartphones to run on those same networks. However, the calculation could be made more difficult by the fact that BlackBerry, even in its diminished state, still runs a lot of key communications infrastructure for governments and big corporations around the world.
The future of BlackBerry, it seems, now depends on the board’s newly-minted special committee finding a suitor with incredible vision and an outsized appetite for risk. If it fails, the chances are greatly increased that BlackBerry will eventually go the way of Nortel Networks — broken up and sold off in pieces.