Hopes of BlackBerry (
TSX:T.BB,
Stock Forum) returning to its glory days have all but disappeared as the smartphone company delivered the most damning proof on Monday that its new phones are a sales flop, as it moves forward with a plan that could result in the sale of its operations.
The board of directors at the Waterloo, Ont.-based company launched a review of “strategic alternatives'' which it says could also potentially take BlackBerry in other directions, such as a partnership, sale, or a joint venture.
Regardless of the outcome, the decision throws the company's future into uncertainty. BlackBerry could be scooped up by an interested buyer or go private _ an idea that has gained favour since last week when reports suggested the board has recently opened to that option, even though it wasn't specifically mentioned in the announcement.
In some ways, the company has been here before, but the stakes are different this time around.
BlackBerry launched a softer review of its “strategic business model alternatives'' in May 2012, which some analysts had expected would turn into a sale of certain assets. That never materialized and BlackBerry went on to launch its new line of phones in late January.
Since then, the new high-end Blackberry 10 phones struggled to gain favour in the highly competitive smartphone market dominated by Apple's (
NASDAQ:AAPL,
Stock Forum) iPhone and the Android devices.
In the United States, the phones were considered a dud almost as quickly as they hit shelves, and other regions, such as Canada and the United Kingdom, delivered lukewarm sales figures.
A breaking point came when BlackBerry received initial sales figures for the cheaper version of the new models, dubbed the BlackBerry Q5. The phone launched last month and was greeted with underwhelming reviews and sales figures that fell short of expectations, though official data hasn't been released.
It seems that no matter where BlackBerry turns, the confidence for the company has faded, and even with a potential sale of its operations ahead of it, some observers still aren't hopeful.
“We don't foresee any scenarios where the value of the company will be significantly larger,'' said Tim Long, an analyst at the Bank of Montreal (
TSX:T.BMO,
Stock Forum), in a note.
“While a change in structure could result in a higher stock price in the near term, we do not envision any changes that would help Blackberry reverse the significant smartphone share loss or rapid decline in service revenues.''
BlackBerry shares were nearly seven per cent higher at $10.74 on the Toronto Stock Exchange, below the intraday high of $10.78 and about $8 below the high in January when the stock was boosted by optimism for its BlackBerry 10 smartphones.
Research firm IDC issued a report last week which showed that BlackBerry has continued to lose its position in the second quarter, falling to 2.9 per cent of the market, even as its new phones rolled out across the globe. The company sold 6.8 million devices in the period.
BlackBerry's strategic review will be headed by Timothy Dattels, who joined BlackBerry's board last year and is a senior partner at TPG Capital, one of the world's largest private equity firms.
“During the past year, management and the board have been focused on launching the BlackBerry 10 platform and BES 10, establishing a strong financial position, and evaluating the best approach to delivering long-term value for customers and shareholders,'' Dattel said in a statement.
“Given the importance and strength of our technology, and the evolving industry and competitive landscape, we believe that now is the right time to explore strategic alternatives.''
BlackBerry also announced Monday that Prem Watsa, the head of Canadian insurance company Fairfax Financial (
TSX:T.FFH,
Stock Forum) and one of BlackBerry's key shareholders, has resigned from the BlackBerry board due to potential conflicts.
Watsa joined the board in early 2012 as part of attempts to revitalize the company, previously called Research In Motion, as its previous long-time co-CEOs stepped aside and installed Thorsten Heins as chief executive.
“I continue to be a strong supporter of the company, the board and management as they move forward during this process, and Fairfax Financial has no current intention of selling its shares,'' Watsa said in a statement issued by BlackBerry.
Heins said there are “compelling long-term opportunities'' for the company's products including a new generation of BlackBerry smartphones, the BlackBerry Enterprise Server for business customers and a new secure global data network.
“As the special committee focuses on exploring alternatives, we will be continuing with our strategy of reducing cost, driving efficiency and accelerating the deployment of BES 10, as well as driving adoption of BlackBerry 10 smartphones, launching the multi-platform BBM social messaging service, and pursuing mobile computing opportunities by leveraging the secure and reliable BlackBerry Global Data Network,'' Heins said in a statement.