BlackBerry's calls have dropped for good. This week's $4.7 billion bailout bid by Fairfax Financial Holdings, a Canadian insurer, isn't going to save the company's consumer handset business.
In the late 1990s, BlackBerry ruled the roost in mobile e-mail, practically inventing the category and dominating the segment for nearly a decade. Its chunky device with its signature Qwerty keyboard was de rigueur on Wall Street and in boardrooms.
But that was before the emergence of the smartphone -- especially Apple's iPhone, which leapfrogged nearly every incumbent wireless handset in existence. BlackBerry, formerly Research In Motion, was slow to incorporate voice telephony, 3G technology and Internet browser capability into its devices. The Canadian telecom giant has been playing catch-up ever since and has lost the smartphone race.
"Absent a miracle turnaround, BlackBerry will shrink to irrelevance in handsets," says telecom analyst Edward Snyder, principal of Charter Equity Research. "I don't think the Fairfax deal will change the end game for BlackBerry's handset business."
Prior to the announcement of the Fairfax deal, Snyder suggested that BlackBerry was likely to die like a lithium battery , unable to muster one last charge. "With its best efforts in smartphones failing and its market share in its enterprise business in decline, (BlackBerry) will slip further into a handset death spiral until it is purchased at a deep discount or ceases operations," Snyder says.
Obviously, it now appears the company will get acquired, but the Fairfax bid for $9 a share isn't a done deal. Several weeks of due diligence must pass while the company is free to entertain other bids. Snyder is skeptical whether other bidders will come forward as the company "had already been shopping itself pretty aggressively without much results."
The acquirer is an insider, having amassed a 10% stake. Fairfax CEO Prem Watsa is familiar with BlackBerry's operations since joining its board in 2012. At the same time, BlackBerry would have to pay $150 million breakup fee if the company accepted another offer. BlackBerry shares closed Tuesday at $8.53, down more than 50% from its 52-week high.
Conventional wisdom is Fairfax would likely shutter the consumer handset business and focus on secured enterprise wireless, which is a viable business with loyal customers.
Still preferred by a shrinking minority of corporate users, BlackBerry's enterprise e-mail business had long been its strength. So much so, it may have masked the company's delayed entry into smartphones -- essentially covering up for the company's weakness in voice telephony -- where it needed to compete with Apple, Samsung, Nokia, Motorola, Palm and others. (continued...)
© 2013 USA TODAY under contract with MarketWatch. All rights reserved.