BlackBerry sale off, software focus foreseen

BlackBerry the company isn't selling any better than its devices. The once dominant smartphone maker has canceled plans to sell itself and will likely focus on software. The company announced today that it has entered into an agreement pursuant to which Fairfax Financial Holdings and other investors will invest in BlackBerry through a U.S. $1 billion private placement of convertible debentures.

The transaction is expected to be completed within the next two weeks. Thorsten Heins intends to resign from the board of directors and step down from his position of CEO at the closing. John S. Chen, formerly chairman and CEO of Sybase, will serve as executive chairman and interim CEO.

Business and technology analyst firm Ovum released the following statement from its chief telecoms analyst, Jan Dawson:

“The appointment of enterprise software veteran John Chen, former CEO of Sybase, as chairman and interim CEO of BlackBerry suggests that Fairfax and others see the company’s future in software rather than devices. This makes sense in light of BlackBerry’s sputtering device shipments over the past few months, but it’s still not clear where that growth will come from.

“BlackBerry’s new investors seem to see its future in software, which means using BlackBerry servers as the core of a broader enterprise device management platform, but this generates very little revenue for the company today. Though it’s achieved some traction with enterprises upgrading their BlackBerry servers, it has failed to sell many BlackBerry 10 devices, and this looks unlikely to change. This ultimately harms the unique selling point of BlackBerry server products leaving the door open to replacement by rivals that are better able to support the more popular Apple and Android devices.

“At the same time, it’s also too much to expect BlackBerry’s other software investments to ramp up fast enough to secure its long-term survival and return to growth. QNX, whose main value was providing an OS for its devices, currently generates less than $100 million a year. Equally, BlackBerry Messenger has had a good couple of weeks of downloads as a cross-platform messaging option, but continues to trail other similar messaging apps significantly.

“Fairfax’s investment will buy the company some time, which it badly needs, but the company needs a new strategy more than ever. If Fairfax had taken the company private, it could have kept that strategy to itself. But with BlackBerry remaining a public company, Chen and Fairfax Chairman and CEO Prem Watsa need to start communicating that new strategy very soon to inspire confidence in a turnaround.”

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