BlackBerry to go private in $4.7bn deal

Struggling phone maker BlackBerry has agreed in principle to be bought by a consortium led by its largest shareholder Fairfax Financial for $4.7bn (£3bn), a deal both parties hope will secure its standing in the enterprise market and turnaround a prolonged period of losses.

BlackBerry 10

The deal would take the company private, removing it from the Nasdaw where its share price has plummeted from its peak of $148 in 2008 when it led the smartphone market to $8.82 at the time of writing. 

Private ownership will allow the company “breathing space” to assess its strategic options, which currently suggest retrenchment from the consumer market to a focus purely on business customers, according to CCS Insight chief of research Ben Wood.

Prem Watsa, chairman and CEO of Fairfax – who last month resigned from his position on the BlackBerry board due to potential conflicts of interest that could arise as the smartphone maker explored its options – says in a statement: “We believe this transaction will open an exciting new private chapter for BlackBerry, its customers, carriers and employees. We can deliver immediate value to shareholders, while we continue the execution of a long-term strategy in a private company with a focus on delivering superior and secure enterprise solutions to BlackBerry customers around the world.”

The deal, subject to due diligence, is expected to complete by 4 November. BlackBerry says it will still continue to explore other options while it negotiates a deal with Fairfax. 

Last week BlackBerry warned Wall Street it would dramatically miss its revenue estimates in the current quarter, forecasting revenues of $1.6bn instead of the $3.1bn analysts had predicted. It also expects to post a $950m loss when it reports its first fiscal quarter later this week, blaming the “increasingly competitive business environment” that has seen it lose ground to Samsung and Apple.

In an attempt to reverse operating losses, the company says it will reduce its workforce by 4,500 – which will include job cuts in its Slough UK office and is likely to involve the reduction of marketing staff as it aims to cut operating expenditure by 50 per cent by the end of the first fiscal quarter in 2015.

In spite of its financial woes, BlackBerry launched what it claimed to be its “best smartphone yet”, the Z30, last week – although the launch was noticeably muted compared to the lavish launch events the market has come to expect from its rivals. 

CCS Insight’s Wood adds: “Irrespective of this bid, questions around BlackBerry’s future remain unchanged. It seems unlikely it can continue as it is and while the most attractive option is to focus on business users, tough decisions will need to be made about which parts of the business to persevere with and which pieces to spin off or abandon.”

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