TORONTO – BlackBerry hopes to clean the slate again as it heads into the new year with another lease on life and a leader who believes he can do what his predecessors couldn’t—save the company from a slow death.
After months of painful uncertainty and dismal financial results, BlackBerry is in the hands of chairman and chief executive John Chen who hopes to navigate the company into 2014 with reinvigorated vision.
“I need to go out and convince the world that the fight has now started,” said Chen during a recent media event at the company’s headquarters. “It’s a long-haul journey—no question,” he added.
The odds are stacked against him, but Chen insists he will rebuild the BlackBerry name by chasing the business customers who helped make the company a powerhouse in the smartphone industry.
“It’s really kind of going back to the roots,” he said.
If the situation sounds familiar, that’s because BlackBerry has been here before.
The Waterloo, Ont.-based company has spent the last few years losing the fight for a stronger position in the market as Apple’s iPhone and other smartphones on the Android operating system pulverized its reputation with consumers as a cutting-edge technology developer.
Last January, after two major delays, BlackBerry lifted the curtain on its latest smartphones and operating system in New York, ushering in what it hoped was a new era that would prove naysayers wrong.
But once the dust settled, it was clear the new BlackBerry 10 phones didn’t connect with consumers.
Most of the advertisements sold vague ideas about the phone’s features, and often the products were leaning on the clout left in BlackBerry’s name, rather than promoting features of the phones.
Chen believes BlackBerry executives were lost as they struggled to deliver the new devices.
“In the past when we were a little troubled … there were too many different paths to see,” he said, reflecting on the days before he started at the company.
“We lost some good, valuable market time that people have taken advantage of (and) from this point on the fun for them will be greatly curtailed.”
A few months ago, even BlackBerry executives weren’t this certain about the company’s future.
The smartphone maker looked like it was about to be broken up and sold, or shrunk into a private company, until a group of investors agreed in November to inject US$1 billion — enough money for another swing at a recovery.
It was a surprise decision by Fairfax Financial (TSX:FFX), one of BlackBerry’s largest shareholders, who led the charge to raise the financing, but also a sign that few others were interested.
BlackBerry had spent months shopping around its assets, but was never able to find a suitor. The company’s co-founders Mike Lazaridis and Doug Fregin sidelined their attempted bid, while big players like Facebook were reported to have entertained the possibility before deciding to bow out.
The new financing agreement brought many quick changes to BlackBerry, including the exit of CEO Thorsten Heins and the departure of various other high ranking executives and board members, some who helped build the company to its former heights.
Chen is confident about the direction he’s headed, even though the reality facing the smartphone maker isn’t so optimistic.
The government agencies and companies he’s determined to chase are notoriously loyal, but once they’ve strayed to alternative platforms it’s hard to lure them back, mainly because business contracts are typically long term.
Many customers prefer BlackBerry’s security technology, but even some big Canadian banks and U.S. corporations, have started to defect to alternative offerings from competitors.
According to the latest financial statements, BlackBerry has lost about 68 per cent of its enterprise business customers over the past few years, dropping to 80,000 from about 250,000 at its heights.
To help retain customers, BlackBerry has given away free upgrades and trials to its latest enterprise operating system that last until the end of 2013. After that, it will make a case for customers to start paying for the service.
“We are going to take the technology message out,” Chen said.
“With the last company I ran, I kept the message on for like 10 years. It probably took five years before anybody even listened to me, and it took another five years for people to believe it. You just need to focus.”
Whether or not BlackBerry has time is debatable.
In its most recent quarter, BlackBerry posted a US$4.4-billion loss as sales of its smartphones continued to fall. The company also burned through about $1.1 billion in cash, though the total amount in its coffers — which sits at $3.2 billion — was propped up by the Fairfax-led investment and a significant tax return.
On Tuesday, Lazaridis grabbed attention for selling $26 million of BlackBerry shares, a move that came before the tax-loss deadline in Canada, but also lowered his stake below five per cent.
Investors appear optimistic, at least for now, helped by Chen’s determined persona. The company’s badly beaten stock has climbed 24 per cent since its latest financial results were released a week ago. On Tuesday, BlackBerry shares closed at $8.25, up 27 cents, on the Toronto Stock Exchange.
“People are excited today, but we’ll see how patient they are in two more quarters when there probably won’t be any evidence of a turnaround,” said Mike Genovese, an analyst at MKM Partners.
He said BlackBerry will need at least another year before any semblance of a turnaround can materialize, while Chen has said he doesn’t expect the company to become profitable until at least the middle of 2016.
Whether the rest of the world has that sort of patience remains to be seen, and investors are taking a risk holding the stock in their hands, Genevese said.
“Six months from now I’m not so sure investors are going to be as excited as the stock price seems to be telling us right now,” he said.
“The stock is a lottery ticket on the miracle they get something right.”