Critical Analysis Paper 2

PlayBook: A hit for J-Lo, a miss for others

BlackBerry

Still in a jam Going private will not solve the company’s problems

Sep 28th 2013 | OTTAWA AND SAN FRANCISCO | From the print edition

ITS

turnaround

playbook

turned out

to be just

as

disappointing as its PlayBook tablet computer, which was supposed to rival Apple’s iPad but never

caught on. Having failed to reverse its fortunes as a public company, BlackBerry announced on

September 23rd that it had struck a preliminary deal with a group of investors who want to take it

private, at a value of $4.7 billion. This is only slightly above its market value just before the bid, and

a massive comedown from the $83 billion the company was worth in its heyday in 2008.

Companies that still insist their employees use BlackBerry devices, and the corporate road warriors

who gossip about them on sites such as crackberry.com, are debating what this bid means for the

future of the firm. Like Dell, another fallen tech icon that recently went private, BlackBerry is

betting it can heal its wounds in the shadows. But they look fatal.

Sales of BlackBerrys have been battered by competition from sleeker devices using Apple’s iOS and

Google’s Android operating systems. The firm’s latest effort to create a hip handset of its own, the

Z10, has also flopped. BlackBerry says it is writing down inventory it had valued at up to $960m in

its latest fiscal quarter, largely due to poor sales of the Z10, and cutting 4,500 jobs, or 40% of its

workforce.

This news, put out on September 20th, whacked BlackBerry’s shares and no doubt encouraged the

bidders to act. Prem Watsa, the boss of Fairfax Financial Holdings, a Canadian insurer and

investment firm that is leading the investor group, knows BlackBerry well. Fairfax owns about a

tenth of its shares and Mr Watsa was one of its directors until he resigned from the board in August

to avoid a conflict of interest when it set up a committee to review options for BlackBerry’s future.

Dubbed Canada’s Warren Buffett because of his appetite for contrarian bets, Mr Watsa will be

making a big one if the deal for BlackBerry goes ahead. The firm has announced that it is

abandoning the consumer market. Instead it will focus on the corporate one, where it also offers

software for businesses to manage and secure their workers’ mobile devices.

But even there its prospects look grim. A survey of North American and European companies by

Forrester, a research firm, shows that BlackBerry’s share of mobile devices used by their employees

plummeted from 57% in 2009 to 21% today. “That’s a death-knell trajectory,” says Ted Schadler, an

analyst at Forrester, which reckons BlackBerry’s market share will drop to single digits by 2015.

BlackBerry’s fundamental problem is that companies are now buying the same smartphones and

tablets that their employees use at home. So, by losing in the consumer arena, BlackBerry will find it

even harder to win in the workplace. It also faces stiff competition from the likes of MobileIron and

AirWatch, whose device-management software has adapted far more swiftly to a world in which

BlackBerrys are being squashed by iPhones and Android handsets.

There is speculation that Fairfax’s move for BlackBerry is designed to flush out a higher offer. Tech

giants such as Microsoft and Cisco are being whispered as potential bidders. But even such deep-

pocketed rescuers would struggle to save it.

From the print edition: Business