November 05, 2013, 4:00 PM — BlackBerry's appointment Monday of former Sybase CEO John Chen as its next executive board chair and interim CEO could be the best news in months for the struggling smartphone company.
Chen is seen as someone who can give business customers more confidence in BlackBerry, analysts said.
"Chen is a no-nonsense CEO who will hold people accountable and bring either new growth to BlackBerry or position it to be acquired at a higher premium than it currently can demand," said Jack Gold, an analyst at J. Gold Associates. "I see this as a very positive step."
But Chen's appointment came amid a series of related announcements today by BlackBerry, including the resignation of current CEO Thorsten Heins.
BlackBerry also said in a statement that it has ended the restructuring review it started in August, which means that a preliminary deal by Fairfax Financial Holdings to buy BlackBerry for $4.7 billion and take it private won't happen. Analysts interpreted the move to mean that Fairfax failed to get financing for the deal.
Instead, Fairfax and other unnamed investors are buying $1 billion in BlackBerry debt at the equivalent of $10 per common share, which represents about 16% of the outstanding shares of BlackBerry.
Because that $1 billion is enough to buy 16% of BlackBerry, Gold reasoned that BlackBerry's market value is fully $6.25 billion -- well above some recent estimates, but less than the combined value if all parts of the company were sold off separately.
Gold said some of the partners with Fairfax could include other potential bidders for BlackBerry named in recent press reports and official documents, including founders Mike Lazaridis and Doug Fregin.
Instead of coming up with $4.7 billion for an outright purchase, Fairfax is now providing $250 million of the $1 billion debt buy, which is expected to close in two weeks.
Monday's announcements come five weeks after BlackBerry announced it would take nearly $1 billion in charges on unsold smartphones, including the Z10, and planned to lay off 4,500 workers.
Despite the negative news surrounding the company, BlackBerry has said it has $3 billion in cash, so it wasn't immediately clear why a $1 billion infusion matters, unless debts are mounting faster than reported. BlackBerry could be moving ahead with the $1 billion debt purchase to prevent other investors from making bids, Gold said.
Fairfax already owns 10% of BlackBerry and its CEO, Prem Watsa, will become Lead Director and Chair of the BlackBerry compensation, nomination and governance committee, BlackBerry said Monday.
A potentially bigger question in Monday's developments is how BlackBerry customers should view future product support from BlackBerry.
BlackBerry issued an email statement to Computerworld on Monday saying it is carrying on with current plans to roll out the Z30 and to support other BlackBerry 10 devices, following up on a series of recent statements affirming its customer support.
"With today's news, please know that our companies' strategy is not changing -- BlackBerry will continue to execute on its plans of driving adoption of BlackBerry 10 smartphones, rolling out its cross-platform BBM social messaging service and pursing computing opportunities by leveraging the secure and reliable BlackBerry Global Data Network," a spokeswoman said via email.
"We are excited to welcome this new leadership to BlackBerry and are confident that their expertise will propel our company into a new chapter that is rich with possibilities," the statement concluded.
Some analysts, including those at Gartner, have urged business customers to find alternatives to BlackBerry in the next six months, but Gold thinks the risk to enterprises is "minimal that BlackBerry won't be able to support them."
The $1 billion investment announced Monday "should help allay fears" by business customers, Gold said. "End users will still need to be convinced by the new devices and have to like the user experience, but enterprises should feel more comfortable now."
Carolina Milanesi, an analyst at Gartner, said that Chen's background at Sybase (now part of SAP) could be significant for BlackBerry's future direction. Chen and Sybase have produced mobile device and application management products, though not actual smartphones or other devices.
"The fact that the new CEO is not a device guy is indicative of where the company is going," she said. That may indicate a move toward more management software and services and bolstered support for larger customers reliant on the BlackBerry secure network.
It could also signal that BlackBerry is not interested in being split into parts, Milanesi said.
Chen served at Sybase from 1998 to 2010, when SAP acquired Sybase, after a long career at Siemens, Pyramid Technology and Burroughs Corp. He now is a director of Wells Fargo and The Walt Disney Co. While at Sybase he directed a company producing mobile management as well as data management and warehousing and analytics.
Chen said in a statement: "BlackBerry is an iconic brand with enormous potential -- but it's going to take time, discipline and tough decisions to reclaim our success. I look forward to leading BlackBerry in its turnaround and business model transformation for the benefit of all of its constituencies, including its customers, shareholders and employees."
Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen or subscribe to Matt's RSS feed. His email address is firstname.lastname@example.org.
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