Will BlackBerry Ltd. (NASDAQ:BBRY) Survive?
BlackBerry Ltd. (NASDAQ:BBRY) operates a secure network for its customers including many government agencies and Fortune 500 companies, handling hundreds of millions of encrypted messages each day. Over six weeks shop period where BlackBerry was considering going private, the news came in day before yesterday that Canadian government would not approve China based Lenovo Group Limited (ADR) (OTCMKTS:LNVGY) to buyout a company having strong roots into Canada’s telecom infrastructure.
Following the high-level discussions with Canadian government, BlackBerry announced on Monday that it abandoned plans to go private and will trade publicly with $1 billion financing with a group led by its major stockholder Fairfax Financial Holdings Ltd (OTCMKTS:FRFHF).It will raise $1 billion in convertible debt given the collapse of a $4.7 billion buyout deal. Fairfax also abandoned its plan to acquire the company and will now buy $250 million of the debentures to become the lead investor in the bond sale. Prem Watsa, Fairfax CEO, who will be rejoining BlackBerry’s Board, anticipated that the turnaround plan will show positive signs within next 4-6 quarters.
However, amidst the raised speculation the stock of BlackBerry plunged 16% on Tuesday, now trading 45% down year to date.
Taking a look at BlackBerry’s financial position, the company has about $2.9 billion in purchase commitments due within next four quarters. Moreover it shed $500 million in the last quarter and if this scenario continues, it would use most of its $2.6 billion cash and investments by the end of FY14. This diminishing funds are going to put heavy burden on BlackBerry’s comeback efforts, believes John Stephenson whose Toronto based First Asset Investment Management Inc. owns some BlackBerry stock as part of ETF (exchange traded funds).
In another notable move, the former chief executive officer of Sybase Inc., John Chen replaced the BlackBerry’s Chief Executive Officer, Thorsten Heins. Mr. Chen is best known for his turnaround efforts at privately held Sybase Inc. The company was reportedly worth just about $362 million when Mr. Chen stepped on board in 1998. After 13 years under his leadership, the company got acquired for stunning $5.8 billion, in 2012. Following which, he joined as a senior advisor at private equity firm Silver Lake. Mr. Chan has also serving as Director at Wells Fargo & Co (NYSE:WFC) since September 2006 and an Independent Director at the Walt Disney Company (NYSE:DIS) since January 2004. In addition, he serves as a Director of U.S. Chamber of Commerce.