Why BlackBerry is considering a sale now

Sales spark a renewed sense of urgency

 
RIM CEO Thorsten Heins Speaks To Blackberry Conference In San Jose last September. (Photo: Justin Sullivan/Getty Images)

RIM CEO Thorsten Heins Speaks To Blackberry Conference In San Jose last September. (Photo: Justin Sullivan/Getty Images)

BlackBerry is officially for sale. The company announced it has formed a special committee to “explore strategic alternatives,” which includes everything from joint ventures to a sale of the company. This isn’t the first time. In a way, the entire tenure of CEO Thorsten Heins has been one long strategic review. In May of last year, the company hired JPMorgan and RBC Capital Markets to examine “strategic business model alternatives.” Heins insisted that all options were on the table, and he never ruled out a sale.

So what’s different this time? A couple of things: early sales figures for BlackBerry 10, and a renewed sense of urgency at the company. Today’s announcement is a tacit acknowledgement that Plan A has failed. The goal under Heins all along was to reinvigorate the company through BlackBerry 10—not just to keep the masses from fleeing to the iPhone and Android handsets, but to entice those who had already abandoned their BlackBerry smartphones to come back. The BlackBerry 10 operating system (and the Z10 and Q10 smartphones) are indeed huge improvements over the clunky handsets the company was shilling in recent years. And Heins decided the company would try this on its own, and he would not split the money-losing hardware business from the still lucrative services business, as some have called for in the past.

But after six months of BlackBerry 10 sales, it’s clear the platform is not taking the world by storm. The handsets haven’t been able to gain much traction in the U.S., where the iPhone and Android still dominate. Even in developing countries, traditional strongholds for the company, low-priced Android handsets are flooding the market. There are plenty of BlackBerry loyalists out there, and places where the brand is immensely popular, but the metrics are not good.

Last week, new data from IDC revealed BlackBerry has fallen to fourth place in the smartphone market, losing share to Microsoft’s Windows Phone platform. The company had 2.9% of the market as of the second quarter, down from 4.9% during the same quarter last year. A separate report from comScore revealed that BlackBerry shed 15% of its subscribers in the U.S. between March and June, a period capturing early sales of BB10. (BlackBerry is making gains on the home front, however.) The number of subscribers is also down by four million to 72 million, as of the last quarter. A reduction in subscribers is to be expected, as users can opt out of certain services with BlackBerry 10, but the overall trends are nevertheless worrying.

There doesn’t appear to be anything immediately on the horizon to spark growth, either. The Q5, a lower priced version of the Q10, is currently rolling out in some markets. The Wall Street Journal pointed out the reviews haven’t been great and the smartphone isn’t actually that cheap. (Somewhat implausibly, the company highlights the Q5’s keyboard as a “stunning, youthful design that radiates confidence.”)

In this context, it’s not hard to see why the board at BlackBerry is pursuing other options more aggressively. A number of potential suitors have been touted over the years, from Microsoft to Dell to Lenovo. More recently, rumours are circulating about private equity groups such as Silver Lake Partners and even the Canada Pension Plan Investment Board. CEO Mark Wiseman said recently he would consider a stake in the company should it consider going private. Prem Watsa, CEO of Fairfax Financial, a significant shareholder of BlackBerry, could also play a role. He stepped down from the board of directors today, citing potential conflicts of interest.

While the company fought valiantly to claw its way back to the top, it appears a more drastic change is on the horizon.

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