For troubled Canandian handset-maker BlackBerry, the proposed $4.7 billion stake buyout of the company by billionaire majority stakeholder and former BlackBerry director Prem Watsa, who is now chairman and CEO of Fairfax, could not have come at a better time.
Last weekend, BlackBerry withdrew the cross-platform BBM app – it has grown more popular than the BlackBerry device itself – citing issues with the unofficial app, and it has not disclosed when it would be re-launched.
This, just days after BlackBerry said it was slashing 40% of its global workforce, rendering the company with just 7,000 full-time employees. This was in keeping with a target 50% reduction in operating expenditure by the end of the first quarter of next fiscal (April-June of 2014-15).
Now, Watsa’s buyout may help BlackBerry, once the smartphone market leader, move up in terms of market share from the current No.4 position, to compete with the likes of Google, Apple and Nokia.
This has a lot to do with the company’s going private, which is expected to take it out of both public glare and constant performance pressure, thus helping it sharpen its focus on long-term aggressive investments and risk-taking.
However, the big question remains – will Watsa be able to turn around BlackBerry?
An industry expert, requesting anonymity, said reaching out to the software developer community may be the first important step for BlackBerry. It also needs to offer them attractive investments to manage BlackBerry’s hardware platform as well as develop new applications, he said.
“In fact, a year ago, BlackBerry was offering developers a fixed commitment of $10,000 on conditional achievement of 100 unique downloads per day. This kind of commitment is not offered by either Apple or Google. So, if this offer is revived, it will help BlackBerry strengthen its enterprise platform,” he said.
The iPhone, he said, has been able to attract all types of customers. “The cross-platform BBM was another defence mechanism aimed at retaining existing BBM customers, even if there was a loss of device customers.”
Mohammed Chowdhury, analyst at PwC, concurred. “The year 2013 is for a shake-up of the device-and-handset market. The telecom sector is finally aligning itself around smartphone play. In this environment, only those players who can offer a true customer experience, that is, a mix of personalised and business services, will succeed.”
The general feeling is that BlackBerry’s downfall has been due to its failure in apps and browsing experience. Experts said it targeted only enterprise customers for long. Technical issues, including run-ins on security of its enterprise server with various governments worldwide, were a recurring feature. All this needs to change. And Watsa would be expected to ensure that.
To be sure, BlackBerry’s board is still looking for interested buyers. And several small tech companies may well be keen on BlackBerry. But, experts said, it may be difficult to get a valuation higher than Watsa’s offer. “Fairfax is a financial investor and not a strategy investor, so a synergy hunter may be willing to pay more for BlackBerry. However, Microsoft is now more or less ruled out as an interested party as it has already acquired rival firm Nokia,” said a technology analyst who did not wish to be named.
His Indian roots
Hyderabad-born Watsa, 63, who received B.Tech in chemical engineering from IIT-Madras in 1971, migrated to Ontario, Canada in 1972 to pursue MBA; but he kept in touch with India, and in recent times invested in ICICI Lombard General Insurance Company and Thomas Cook India.
He co-founded Hamblin Watsa Investment Counsel (which was acquired by Fairfax in 1991) in 1984. The following year, Watsa took control of Markel Financial Holdings, which was later re-named Fairfax. Watsa is the chancellor of the University of Waterloo, a Canadian city where BlackBerry is headquartered.