The Fairfax BBRY investment: One day later

Prem Watsa
By Chris Umiastowski on 5 Nov 2013 08:23 am EST

Now that I've had 24 hours to think about yesterday's interesting financial twist and read plenty of other reporting on the subject, I thought I'd come back with another post to clear up a few things.

First off, it was likely incorrect of me to say that Fairfax wasn't able to raise the $4.7 billion required to take BlackBerry private. I know some reputable media outlets said they were having trouble raising the money, but it sounds like the truth of the matter is a bit more nuanced. I think Fairfax probably could have raised the cash, but part of the cash would have come from BlackBerry taking on debt, and perhaps the interest rates being offered were unfavorable enough that it threw off the model. All of a sudden a leveraged buyout doesn't make sense.

The financing BlackBerry has arranged with Fairfax is a smart plan... It gives this company more bullets to fight, not fewer.

I've also seen a lot of reporting in the week leading up to this deal that all potential buyers had to have their offers ready for Monday Nov 4th. Unfortunately, the people saying these kinds of things don't understand M&A. Looking at all of the better quality reports out there, it sounds like Lazaridis / Cerberus / Qualcomm were serious about a potential bid, but would have needed another month to go through the numbers, do their own due diligence, etc. If BlackBerry had gone firm with Fairfax on the original deal it would not change things for other bidders. They are not on any deadline.

This brings us to the next obvious topic: This new convertible debt financing deal doesn't change anything for a serious buyer either.  Someone can still come along and put in a bid to buy the company. The only difference now is that the BlackBerry board isn't actively out there seeking a sale of the company.  That's over.

Next up:  Why did the stock collapse yesterday? Because the market's initial reaction to the news was the typical, "Oh, Fairfax failed to raise the money, nobody wants to buy this company".  We'll see where the stock price shakes out in the next month. I've lost count of how many times I've seen stock tank on news just to recover as people's understanding of the news improved, or vice versa, when stock prices soar only to fall back down after the news is truly digested.  

Finally, I want to address the folks who thought my editorial from yesterday was some kind of exhuberant optimism. It definitely was not.  I'm not particularly bullish on the business right now. BlackBerry 10 has not sold in great numbers, and was severely hurt by the horrible process called a strategic review. I've written about this at length. It's unclear what the company can do to improve sales.  Meanwhile, we have a legacy service business that is shrinking. This is all bad news.  Yesterday's news doesn't change that, which is why I ended my editorial clearly stating that we still need a strategic plan.  

That said, the financing BlackBerry has arranged with Fairfax is a smart plan all around. It gives the company more cash to execute a turnaround whereas a privatization of the company would clearly NOT have done so.  That's the big difference, and that's why I like the deal.  It gives this company more bullets to fight, not fewer.

Reader comments

The Fairfax BBRY investment: One day later


Lets hope it changes the perspective of the market towards BlackBerry.

John Chen may be more likely to be able to adjust market perception, but I fear as a public company BlackBerry doesn't have much chance to turn things around. They'd have been better off as a private corporation, though perhaps even Watsa didn't expect revenue to collapse and cash burned so quickly.

I'd argue the stock price fell to where it would have fallen had Watsa not stepped in with the $9 offer. Seems the market values the company at around $6. Which is where it fell in September 2012.

It's ironic that having done the nasty stuff to handle getting BlackBerry costs under control, the board ousts Heins and leaves someone else to benefit.

Yes i think we all agree if had Fairfax taken BlackBerry private it would have a lot better.

Question to Chris. I heard one analyst on BNN say since John Chen is an interim ceo he's just there to see if he can do a quick turnaround and make the company look more appealing for buyers and or to just get a better look inside of the business for the Silverlake group. What are your thoughts on that?

I don't know if I'm looking at it correctly but it seems that SAP is behind this deal, 750 million is unidentified investors. It makes sense to me that SAP didn't feel comfortable with their name on it, so they put their guy in charge to drive this thing, inevitably to take control if it goes their way. Mikes deal was structured the same way, Qualcom would invest with Mike possibly in charge. What is interesting is that BlackBerry weighed both offers and went in this direction, whatever that direction will be is anyone's guess, but I'm assuming it is different from the other offer.

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Chris you say:
"I'm not particularly bullish on the business right now. .... It's unclear what the company can do to improve sales."

Sadly as a stockholder I agree with you. The new Z10/Q10 phones have had every chance to succeed. I believe that BB did not make the proper overtures to the network providers. Apple and Samsung are mopping up the market by aggressive sales programs.

Where I think BB will make the best inroads in the near future will be BBM. They have yet to provide information on their program to make money on it. In the past their only positive cash flow on it was from monthly BB plans. But for the future: payments from others??
There is money to be made on BBM type products. Look at the enthusiasm for Twitter and Facebook stocks. These two have less to offer than BB (twitter never made a profit and FB is building a cash flow program). BBM already has some income making as stated above.

Hardware in the near future is a tough sell. Cell phones, as a commodity, low margin Chinese makers are already making strides to jump on the market using Android OS. This is something they did not have to pay to develop. This leaves both BB and the other major players (Apply and Samsung) difficult to sell premium products.

Yes, except for the line "It's unclear what the company can do to improve sales."

I have a 5 point plan that I'd be happy to share with Chen in exchange for a modest consulting fee.

Good article Chris. It is unclear what can be done to improve sales, and whether these handset sales can be done profitably in a hardware business that seems to be cut-throating its way all the way to the bottom. Can't compete with Google because it is under-cutting everyone to get an Android-Google "portal" into your pocket to make money selling the data from your activity. BlackBerry doesn't do this. Can't compete with Apple's premium-priced options as there is a clear differentiation there in terms of device build and esthetics, plus the "walled garden" approach and iTunes integration.

So how is BlackBerry to win back on the hardware? Sure you can lower prices even further but then you are losing more money... maybe worthwhile to simply "seed" the market with your devices. The carrier back-end for BlackBerry services is gone for regular consumers so no revenue there, and if you lower prices you increase the perception that your products belong in the lowest tier. Plus you will always be undercut by an Android device.

BlackBerry needs to concentrate on what clearly differentiates itself from the rest of the market, and drive further ahead than any of its competitors in this. Clearly they have identified strong points as being security, being able to work and get things done on the device, the "mobile computing" idea, enterprise, integration with other embedded QNX systems. Perhaps creating some accessory hardware that can be used in corporate environments, meeting rooms, automobiles and homes that allow seemless integration with BlackBerry devices to make it easy to move and push content. Think of hardware that can be used in shopping malls for location-based marketing. This is a huge untapped enterprise-related area. I am sure there is some innovative software solution on BlackBerry hardware which combines some of these things to open a door to a whole new area.

I have thought for a while that enabling Balance by selling small QNX based devices (could be arm based and the size of a Roku 3, 2 or 1) that runs BES10 and managed from a BB10 device would be very useful to professionals and small businesses alike. If Balance is extended for cases where people are working for more than one company, it becomes useful for families to manage information on parents' and their children's mobile devices.

Not everyone has Windows Servers to run BES10.

I don't know if they have a chance in the consumer space as John and Jane Q Public still pretty much think BlackBerry went out of business or are going out of business. It will take an enormous effort to turn around the consumer side of the business. An effort bigger then $3.5 Billion I think.

That said, I still think they can turn a profit and leverage their assets to grow their cash pile to get ready for the fight ahead in the consumer space. BBM seems to be a hit in Android and iOS. That's good news but they need to be FAST at getting BBM voice, video and Channels out to those users. Why? Because they need to turn BBM into a money maker and leverage those 100+ Million customers.

What this deal may do is restore faith in BlackBerry within the Enterprise sector. They need more BES 10 installs and as many contracts to deploy BB 10 phones to corporate workers as possible. This is their other potential major revenue stream.

Then there is M2M and QNX Car. This is the major new business that BlackBerry MUST emerge as a dominant player in within the next two years or so.

I don't know if the effort would be enormous. It's been stated over and over that there is zero advertising. Youtube videos do not equal TV commercials. I understand TV commercials cost money but they reach a much wider and diverse public. They need to get their name out there again in the mainstream.

It wouldn't be enormous, really?

Q2 Results Sales

North America sales are down 46% from last quarter.
Europe, Middle East and Africa (EMEA) sales are down 49% from last quarter
Latin American sales are down 56% from last quarter.
Asia Pacific sales are down 47% from last quarter.

Turning around these numbers, not enormous, more like miraculous!

Let's be honest here, most people were all for "Thor", "Heinz Ketchup" when he first started so what's going to be the difference of putting another person at the helm? As far as what I have seen, he tried and that's about it. I don't really blame the guy.

I don't know what makes a good CEO or I would be one but BlackBerry itself definitely needs to get back to its core devices while still moving into the future. What does that look like you ask? Well their core is physical keyboards and the future is larger screens & larger batteries. How that will look like, I have a few ideas but if BlackBerry can figure out how to do this, they will get sales again.

Also, marketing, they need consistent marketing. Get the word out there!

I don't think he tried at all to address the consumers himself. Did you see any interviews on TV with him. I didn't see him at all since the launch.


Bloomberg, CNN and one other channel did interviews with him. I've seen him on TV after the launch of BB10 a couple of times.

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Well that's good. CNN reaches a lot of people. I'm from Canada so don't watch to much US news even though we get all the same channels. But I really think they need somebody on the for front to really push the new OS. Give one to Miley Cyrus lol and show her using it in one of her videos. I think the younger generation is where it's at, they don't remember the old Blackberries and may not be as biased.


Heins was not trusted or respected by Wall St. or Bloggers. Hopefully Chen will be.
When Heins spoke, people thought he was making things up to make BBRY look better, or buying time.
With Chen, hopefully he will be able to be taken at his word.

Trust in the leadership's honesty and integrity are vital. Heins did not have this.

you wrote:
<< I don't know what makes a good CEO >>

the difference between the Thor from January 2012 and the Chen from November 2013, is that Chen has already had a CEO position several times.

And we know how he spent his time during those positions, and the results of his journeys in those companies (especially how he transformed Sybase when Oracle was installing its supremacy over the world).

I will do some research on Mr. Chen as I'm not familiar. Hope all the best for BlackBerry really and I hope they start making some good products again, and don't leave out the physical keyboard. What ever devices they release, it has to be two prong from the get-go. All touch and physical keyboard devices, released at the same time.

Hey Chris. Great as usual.

Q Some analyst are stating that Fairfax still took over BlackBerry even though they didn't buy them. Would you say that too?

Yes, Chris thanks.

Or maybe a different sort of the same questions is, and heaven forbid, I don't think this will happen, if BlackBerry goes under, and Fairfax is the only creditor, do they have control of all assets in the company? That would be a nice hedge of bets.

He could end up controlling 26% of the corporation if he decides to convert on the $1 billion debenture.

I don't think the entire $1 Billion is his to control. I think 75% of that is outside of Fairfax.

Still debating on whether or not to pay out £500 on a Z30, or wait for the inevitable price reductions. Decisions, decisions.

Wait until January 2014. The prices of all BlackBerry 10 smartphone are going to drop significantly to reduce inventory. The release day pricing of these smartphones was ridiculous considering someone at BlackBerry mistakenly thought the year was 1999.

In 1999 these devices would have cost around $10,000 easy. The prices really aren't that out of whack. Adjustments are however probably necessary.

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Remember when the OTPP LBO of BCE fell through for the exact same reason? You never know for sure until you do diligence.

Clearly Fairfax has been looking for investors (as opposed to creditors) to supplement his buyout plan. He could have organized the loans he needed to buy the company without too much trouble (as he has implied in his interviews).

And it seems he couldn't find enough investors to get involved to give the company a reasonable chance of survival as a private corporation.

So rather than take on loads of debt and put the turnaround at risk, he took what he sees as a lesser risk of investing $1 billion cash to support the company as a public entity, and hire a "rock star CEO" to complete the turnaround.

Still an enormous risk but I have to admit reluctantly, as Chris says, that cash wise it's a better deal for BlackBerry. I just wonder what will be left when these guys finish their carve up. And will John Chen be able to keep the market wolves at bay when he inevitably has to report losses at the next earnings call.

A leverage buyout never made sense due to the negative cash flows. It's impossible to do with negative and uncertain cash flows. Leverage (debt) requires reliable and sustainable cash flows.

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The business had obviously already collapsed to initiate the strategic review. Debatable whether this had much effect

"Debatable whether this had much effect".

Not so. A variety of enterprises have already said they have postponed upgrading to BES10 because they were worried about the companies survival.

The problem is I don't see the latest deal as really settling the question as to whether BlackBerry will survive. As a private organization, we wouldn't have known what was happening and the market would have gone quiet on BlackBerry.

Another great post Chris!

However, I would have liked them to go private. I think a huge part of their problem is the negative press, and if they were private, they wouldn't have had to air their dirty laundry in public

Such a shame. O/S Ten kicks ass, it has matured nicely, Just wait until you people who have not experienced it yet are abe to upgrade. To a bright future.

Loving 10.2

What if Apple bought Blackberry? It seems like a good deal to me for both parties. Apple would get move into Blackberry's corporate services, overseas markets, and get access to Blackberry's patents. Blackberry would get... apps and good marketing. Apple has been slipping behind Android. Perhaps this partnership would let them move ahead again.

I agree. I posted that a while back. BlackBerry could be there corporate/consumer device while Apple products meet the needs of the non business, consumer side. In order to be a true corporate device you need high security which I believe hampers the ability to allow everything the consumer may want. If certain apps require a wide open playground, how can they actually be good for the corporate world.

Trolls should be forced to use BB10!

Apple doesn't need BB devices. They have pretty much already taken over the business market. With IOS7 Apple has features and security options that BB10 does not. Plus... Apple has the apps. Pretty much all of them.

edit... I should add. I really am a fan of BB10. But without the apps we need I can't push it out to my users.

Care to elaborate? Last I've seen there hasn't been even one enterprise or even a mid-size business deploying any iPhones as their corporate devices, at least not any organization that actually has something that resembles an IT department. I'm not mocking or being condescending. I genuinely want to hear your angle.

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Features wise (as one example) IOS7 allows for app specific VPN tunneling. Basically it leverages something like Cisco AnyConnect so that when a user launches an ESRI app or something else that needs internal resources then a connection is established for that app and doesn't affect the rest of the device. We're still testing so it's not officially better yet but the potential is nice. It definitely keeps us from having to configure the entire device through a specific VPN tunnel which borks the user experience for everything else.

With regard to iPhone penetration into the business world, there's a TON of evidence of that around. Hell just look at the explosive growth of Enterprise MDM solutions (that aren't BES). Nearly all of them are very aggressively targeting IOS (and Android as a secondary) because that's where the money is. IOS in the Enterprise is very real and it's really not that bad. And I say that as a person who is not a fan of Apple but I recognize the balance with value to our users and the cost effectiveness of application/device management.

I suppose this is actually not a bad outcome.
BlackBerry will (probably, you never know...) remain a whole, and they'll continue to make phones.
And I'm actually glad that BlackBerry remains on the stock exchange, otherwise we would be seeing less of Chris's interesting stock articles. I've learnt quite a lot about trading by reading these posts!

Yet you still bought shares in BlackBerry and now cannot afford to buy an ice cream cone on the hottest day in July. Just kidding.

Does anyone care that Prem Watsa lied to us about having financing for the deal not once, but twice?

I was told by many of my friends here that Prem Watsa was an honorable man.

I don't remember Warren Buffet ever being so misleading.


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I don't need to "Chris" to tell me... go do your own due diligence and you will determine that I am correct on the assertion....

I've done my own due diligence and I cannot find anything to support your thesis. But considering your comment history, I've come to the conclusion that you are as much a liar as you claim Mr. Watsa to be. Just a thought.

I guess you're assuming that he couldn't have pulled it together. Are you sure he couldn't or did it just not work like he said?

from what I have read it seems like fairfax is in with the first $250M but no mention of any of the rest of the funding. Chen must be bringing more than himself.

I agree that debt financing $4.7B would've been unwise. Does !B on new debt not make this less attractive or could other investors be buying control on the cheep with Watsa?

Interesting ... trying to decide if I should buy a bit more or sit tight , hmmmmm.

My take is slightly more optimistic. With the injection of $ 1billion into the company, it effectively wiped out the write down of unsold inventory. Last quarter's loss was largely due to said write down. Now, BlackBerry is sitting on a large stockpile of paid for devices, which could be used to augment a sale of BES10, making an attractive package to prospective customers.

Agree. The $1B write down is paper transaction. The phones will penetrate the market and advertise BlackBerry 10.

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Excellent point. Whether this happens or not - there is an opportunity that can't be missed here. This has to be one of their best options though - great insight.

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It's amazing how people think BlackBerry suffered a massive loss. It's true that they lost some cash position, but also have a massive inventory that they can move to offset that somewhat over time. The biggest problem is turning around perspective. The National News shit all over BlackBerry again last night. When will it ever end. Good news is my z30 is on order

Trolls should be forced to use BB10!

So much business talk around here these days CrackBerry.

Let's just talk about the phones, OK? I love my BlackBerry Z30! :)

(good post Umi... fingers crossed the changes all work out for the better. Still lots of great assets, people and drive left in the company!)


Spoken like a "true Canadian", Kevin. BlackBerry burns its investors and "let's just talk about phones".

OK - how are the Z30 launches going around the world?

Will the new BlackBerry team put up a sign in a USA carrier to announce Z30?

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You have a good point about the launches and sales. Any insight from the CrackBerry team would be welcome.

I think there should be more talk about business, most of us here I imagine know the capabilities of BB10 for the most part. Hopefully management might read some of these posts and take notice, because there are a lot of interesting ideas and a lot of people are saying the same things. I always wondered if BlackBerry executives read Crackberry/ Mobile Nations regularly.


well you/we can 'talk about the phones' all we want, and dance around the campfire like happy little campers, but the hard truth is the devices aren't selling. Carrier sell-through is the gasoline that drives the engine of the BlackBerry bus. Yes you can change drivers, and paint the bus a different color, and say 'hey things are great now - look who's driving the bus now!! That old bus driver was crap; our new driver will make things SO much better!'

But if there's no gasoline (selling of devices), all that high level stuff doesn't matter one bit. And the truth is, the devices are <not> selling in numbers enough to sustain this thing.

I give it 12 months, max. Tough words, I know - but that's reality right now.

I've posted this many times, again for the Biz talkers/posters, johnnymac is spot on...theses numbers represent monumental issues for the future...

Q2 Figures

North America sales are down 46% from last quarter.
Europe, Middle East and Africa (EMEA) sales are down 49% from last quarter
Latin American sales are down 56% from last quarter.
Asia Pacific sales are down 47% from last quarter.

Come on CrackBerry Kevin. Surely you can't be serious in thinking everything is good in the Land of BlackBerry. We can agree the BlackBerry 10 smartphones are high quality with a few rough edges still being ironed out on the software (applications) front. Prem Watsa is a pariah having worked out a back-room deal with the BlackBerry Board of Directors and/or former Chief Executive Officer Thorsten Heins. Fairfax Financial Holdings could have backed out of the deal, as they did, with no financial penalty, but had BlackBerry changed it's mind the company would be obligated to pay someone, presumably Prem Watsa, a hefty sum of money. Then we find out Prem has negotiated a one billion dollar buyout of the company via a controlling seat on the BlackBerry Board of Directors. No, I'm not cyncial at all.

Your kidding right?

The whole earning pre-warning, tanking the stock, the LOI that made it look like FF was doing us a favor with a $9.00 buyout

This guy conspired and colluded plain and simple.

Do I trust him, NO

Mike L should go ahead with his bid.

I think that Heins was hired to restructure the company and get BB10 BES10 out. While BB10 did soso, BES10 is being increasingly picked up around the world as companies and govt realize that BYOD is not so secure on the one hand, and that BB10 devices are super secure on the other hand. So in my opinion, he did what he was hired for. Remember that, as KEvin pointed out, it was not evident that BB10 would see the daylight a year from now. Plus, QNX is gaining momentum and recognition more and more. BBM is a success despite the launch issue.
So, Heins did what he needed to do, now someone like Chen can pick up and continue the fight.

As they said, Heins, put them on the starting line, but it is not a 100 m dash here but a 4 X 100 m relay, and Heins just managed to finish the first 100m maybe not at the 1st, 2nd or even 3rd place and pass on the relay stick to Chen, who will take it another 100 m before giving it to another CEO.

Well said. Too many people $hitting on Mr Heins. He got the company to focus operationally and to build forward thinking quality products. BB10.2 is simply beautiful and that makes my iPhone friends a little bit jealous. He also kept the company afloat during a very difficult period.

The future, however requires a different CEO. It will require someone who is able to strike alliances and partnerships especially when in comes to the platform. If there is one thing the last few days has taught me, there are a lot of companies wanting to get into the mobile space and they want a secure platform. They're done thinking about Android.

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If you look at it that way,ever time a runner makes a false start he risks the chance he will be disqualified.I think 2 of these and bye bye.thor made many people uneasy every time he opened his mouth,BYE BYE and good riddens.

One other thing that Mr. Heins can be now, is the 'sacrificial lamb' in regards to all the job cuts that needed to happen. Shrinking a workforce is by far the messiest part of restructuring. Who ever was in charge at the time would have a hard time shaking the internal reputation as the guy who 'gutted' the company. I think he did a really tough job that, unfortunately, needed to be done. BB can now move forward with a CEO who is untarnished from all that has happened in the past 2 years.

Yup. That's why the big buyout agreement. You come in, do the dirty work, then you leave with a tarnished reputation, but you will never have to worry about money ever again.

Trolls should be forced to use BB10!

Yup. Well said.

Still would rather they went private. But Heins may not have been the best bet to take them forward. And Chen has links with China that may be essential for survival.

There's clearly something about Chens vision that has persuaded the board to drop their previous strategy and back him.

Kojita - you said this:

BES10 is being increasingly picked up around the world as companies and govt realize that BYOD is not so secure on the one hand, and that BB10 devices are super secure on the other hand.

I don't know what planet you're on, but in my observations, very few enterprises are actually moving away from BYOD. If you read the (non-BB-loving) blogs out there, such as and other enterprise-focused sites, BYOD is taking over, and BB is on the out.

So you're just fooling yourself to think otherwise.

Chris I would still like to know why the current executive group didn't get more rope? Thor really only had his team in place for a year and had to clean up the previous ridiculous organizational mess left by Mike and Jim.

Well written Chris. All BlackBerry has to do now us get rid of the guy in marketing.

BlackBerry weapon of choice.

I couldn't agree more.

However, it's still unclear WHO was driving the Marketing bus these past 18 months ... it "COULD" have all been TH's directing and instructing that resulted in the catastrophic Marketing clusterfkcu that became EVERYTHING BB10-launch related. Maybe Boulben was just following orders.

While I have nothing but disdain for Boulben's performance (i.e.: 100% "lack thereof") and visibility/presence ("ditto") in his role, and have repeatedly called for him to be tossed, there IS that little matter of the CEO directing and approving EVERYTHING about how things get done and what is said.

After it became known that TH's "failure handshake" would potentially be greater than his "success rewards" over 2-3 years, I began to at least question whether TH empowered and enabled the Marketing group to "do great things" ... OR whether he tied their hands and stymied creativity in all their approaches and efforts.

Unless someone spills the beans (at some point) we may never know, of course, and "today" it doesn't matter.
I say, just toss 'em all and - THIS TIME - pay a little more attention to their thinking than their history in the hiring process.
Hiring people based on a CV / Resumé looks good - on paper - until it becomes clear (as it has here) that CVs and Resumées don't have GREAT IDEAS, skills and abilities. People do, and CVs are merely descriptions which can't be accurately keyword scanned to give an accurate insight into how well individuals will/would perform or apply themselves.
So, yes, TH and Boulben probably had THE most impressive CVs, pedigree and work histories ... but all I want to ask is "how well did THAT work out?"

Suffice to say, BBRY is in critical need of Marketing that's "orders of magnitude" better than ANYTHING we've seen from them to-date. And they need it "10 hours ago!!!"
Now, to be clear, I don't mean "bean-counter" better. I mean "CREATIVE, CONNECTIVE, COOL and COMPELLING."

So, I am an experienced Marketer, I would deliver precisely THAT, already am in Waterloo ... AND available.

If someone from BlackBerry reading this is intrigued, there ARE ways of reaching me.

THAT's MY 2 cents fromour Penny-less country.
Cheers & keep moving!

Honestly even something just shocking would work. Screw advertising, have the new CEO hold a press conference and say only one thing. "Buckle up mutha******" That would pretty much put BlackBerry back on the map and I feel like something that absurd would shake the uncool business stigma that the younger generation attaches to it. Now of course this might be a bit absurd but something like that even in a commercial may do the trick.

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I hope you're right, I'm investing in BBRY since March 2013 and at that time I saw a very good growth perspective but now I'm worried about the latest events (very poor sales, BAD management communications, etc). I hope the new CEO Chen could do well to turn things around :)

Prem Watsa has 1 billion on the line. He will see to it. BlackBerry has great potential. They just need to sell it.

Trolls should be forced to use BB10!

I worry that the $1b is going to go 'poof' in smoke on write downs of q10s and q5s..

Don't expect too many sold.

I also expect new CEO to clean house and force write downs Heins and co were trying to avoid.

So short term could be more pain unless we get a patent sale,

Thx for the great article.

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Also, where did Lazaridis disappear to in this latest "turn of events"?

Did he go to an "all you can eat buffet, or something"?

Leadership is still in question here?

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I still have a good-looking BBRY in my hand that works just as I need so therefore I'm happy today! Tomorrow's not guaranteed.

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Kevin, you should be proud that the CrackBerry community cares about the health of BlackBerry as a company. Android users would dump Google for the next best thing without blinking if they were to collapse tomorrow. This shows that both BlackBerry and CrackBerry attract a better class of people.

I used my Z10 to create this CrackBerry madness!

Google will need advice from Blackberry management on how to destroy a company for it to collapse. Besides, companies provide services and products to customers, that is as far as the relationship goes.

Main thing that needs to happen is get those z10s in people's hands. Use the inventory to have people sign for bes. Secondly get device back on shelves, Best buy no longer sells any BlackBerry devices and everyone I work with ask me my favorite device and I can't sell them it.

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Good post. My question is what is BlackBerry's profit centres?

Right now messaging generates nothing.

Sales of handsets are small

BES 10 with its free server and $19 per year CALs will never generate anything in that current structure.

There will need to be a whole new thought around this company and its assets.

The biggest future I see is BBM. Consider if messaging is 'the new email' and the delivery platform for many, many things.

You provide a secure channel for that in a maturing field like messaging and you may have something. - Mobile: Monitor. Manage.

With new management, a fabulous new model (Z30), BB10 10.2, BBM4All and an extra billion to use, I feel a confluence of very positive events has occurred. While I would like to have seen them go private, it may be that the aforementioned confluence will be a very good thing to be seen by the markets.

I think that is another great company was under the control of a secret society ;)
I think that all of the panic created by all this time around the company was artificial.

A joint venture would still be interesting.. wonder of that's in the cards still with this turn of events.

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If they intend to move the BB10 platform moving forward and leverage the existing user base, they NEED to get BB10 devices into the hands of BBOS users.

This is an example that is being repeated...I have a cousin who is struggling with a Storm and looking for a new phone. Her default choices? iPhone and Samsung. does BlackBerry compete? Offer to exchange her phone for a very reasonable price.

Impossible? Doesn't Blackberry have a warehouse full of written-off Z10s? Would the Z10s serve the platform better in the hands, or in a warehouse becoming obsolete? Think what would happen to the platform if in a short space of time the BB10 user base increased by 1 million users.

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Why doesn't she pick up a z10 at Verizon? They're free on contract.. I don't understand how her choices are only Samsung or ios.

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Indeed really, put those ones on BBOS user hand's
+ make the speed dialing into 10.2.1 builds ASAP!!!
Since lot of them are sticking BBOS cause speed dialing. (btw I'm not of that ones, easily switched and enjoyed BB10)

Q10  OS Radio

All this deal dies is lengthen the runway a little bit. Its gonna run out sooner or later, I hope they really do some crazy stuff in the next quarter. Fire sale those devices damnit! Market share over profit for the short term!!


Great article. My thoughts were always about looking for some cash from a reputable third party or some kind of partnership. Selling to a Chinese or even American company was never in the plans, especially if the Cnd government would never approve of such a deal. The NSA issues are serious especially if owned in the U.S.A.
They now know who came forward and what they have to offer and perhaps now they could make a strategy moving forward. It was never about a break up. Analyst keep pushing for this and when it never happened they are the first to put a negative twist. I was hoping for a billion
dollar injection but hoping that it came from the likes of Cisco, or Facebook. But Fairfax injection is not bad at all.

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I agree with what Chen said about confidence. They have a good product in a vibrant marketplace. They have the pieces of success, but not the confidence. So, they need their employees, customers, ans shareholders to have confidence that they aren't about to collapse. $1BN helps with that.

If I were a CIO of a large company deciding on a mobile platform, I am going to be hesitant about going with someone who is unlikely to around in 2 years. I have to look at it objectively.

But... Can they still say they have zero debt? Did they essentially take out a $1BN loan or is it more complicated that that?

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Can we get someone in there that understands telecom and marketing now?

Anyone can come in and just fire a bunch of people to make the books look better.

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This seems like a complete replay of what happened to Palm and WebOS. Like BB10 WebOS was hailed as a very competitive operating system to IOS and android. There was alot of hyoe surrounding the Palm Pre along with a corresponding bump in Palm's stock price. But the phone didn't sell. If you recall they had an exclusive with Sprint and the phone just didn't sell. The stock cratered, Palm burned through cash trying to release newer models and a tablet and ultimately had to sell to HP. In fact, they were quite lucky HP came in and bought them or they were on the verge of going out of business. What's going on with BBRY presents an almost identical scenario. To me BBRY's mistake as was Palm's was waiting way too long to put itself up for sale. It needed to do that when BB10 was still in development. Then you would have had bidders bidding on the promise of a future operating system. Now everyone knows it won't sell to BBRY will be lucky to realize anything in a sale.

That's good of you to clear up those mis-conceptions. In fact, you could say that Prem has opened the door for someone to make an offer today! The sooner Mike L and his team step up and make an offer the better for them. Remember, few companies have had access to as much information as Mike and his group have had so far here. The breakup fee is gone, Heins is gone, there are several seats to be filled and the stock is stupid cheap. The window becomes $ 7.50 - $ 10.00/shr and Mike can decide if he wants the bond financing or not. But he has to move fast if he wants a restructuring of the proposal. I personally don't like the bond deal (for me, they should have given BB an open door offer on the bonds for say, a year) but I can see how it will solidify Prem's voting power in the years to come.

Q1 2014 they have to pay out 450 million. That one billion will be over half gone in one swoop. 500 million isn't that much more to keep them going.

They will be burning through at least 400 million a quarter. It certainly won't take that long for the cash well to dry up. Blackberry needs another revenue stream ASAP. Because those legacy devices will no longer keep the cash flow stable..

It really doesn't matter if BlackBerry has very little debt or the best smartphone on the market. BlackBerry needs to have an aggressive marketing campaign which introduces the regular John Smith to the new line of BB10 devices. Period.

Curve 8320, Bold 9780, Bold 9900, PB 64gb, Z10

If BlackBerry has so much cash on hand already then why do they need this billion?

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Wow. Just wow...

Chris, you realise BlackBerry are apt at burning through cash like it's going out of fashion.
What's galling is that Chen gets to commute from California to Waterloo via private jet for as long as he's interim CEO. A very cushy deal indeed.

Also, Fairfax are only putting up 250 million dollars of the 1 billion total.
BlackBerry have to pay back the loan at 6% which in today's economic climate isn't favourable.



Any idea or suggestions on how BlackBerry could address the negative press? It seems that most media even make good news to sound bad, do they have some sort of motive? Or maybe they get more hits on their Websites when they post negative news.

I think the only way to battle it, is to call them out and make more special appearances on talk shows, more press releases etc.


Thanks Chris, I would imagine that there has to be some good news around the corner, mike and prem were both interested in buying the company and they have more inside knowledge than anyone

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This is the last kick at the can for BlackBerry. I really hope they can pull through! The z30 in such an awesome phone, I want them to keep improving bb10 and make more awesome phones.

Posted from my Z30

Chris always does the balancing act of being optimistic and pessimistic about the matter....
Another great article Chris.... :)

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Nicely said. I think that some critics are SO negative on BlackBerry that balanced reporting seems "pollyannaish".

It's the usual situation that is hard to comprehend. Nothing has changed and everything has changed.

Nothing in the sense that last week's real problems are still here. Everything in the sense that the company has changed direction.

The success of BlackBerry depends on the changes and their effective execution.

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Chris, I commend you on correcting your statement on Fairfax being unable to raise the $4.7B. It's a small point, but we rely on you guys for accurate reporting, and being the #1 BlackBerry site, you guys are being quoted in other publications elsewhere. Thanks for your due diligence :)

Chris says "The legacy business is shrinking..." Agreed! As of the launch of BBM on Android and iOS, the legacy business is done. Folks were buying legacy devices to get in on BBM. They no longer have to. This is why I wondered why they would even launch a BB7 phone in 2013 with BBM going cross platform - a real bonehead decision IMO.

Chris also adds the deal gives BBRY more bullets to fight. It was important that they start to fight with a winning strategy. They had no strategy the last year or so, except to get BB10 out (good!) and to slash costs (sorta good). You only shrink when you don't know what to do. BBRY should have had a counter attack plan of action - a HUGE selling job of every single detail that makes BB10 great (and so much better than the competition).
Many retail folks keep saying that BlackBerry just built an iPhone clone that is more complicated to use. BB10 is so much better than that! The ONLY folks saying so are on this site and a couple other BlackBerry fan sites. That's a pretty small marketplace for BBRY to sell to.
Why doesn't BBRY show how EASY it is to use a BB10 phone? Where's that ad????? Forget apps, if you show how easy it is to use, folks will come knocking.

Amen to this, and it should start with the carriers! The folks at my local AT&T store are absolute death on the BB10 devices! I realize that their reactions are likely prompted from "unhappy" customers, but what is making the users unhappy? Is it the hardware, the OS, or their own impatience in having to learn something new!?
My suggestion for the BBRY management would be that they get a spokesperson (people) who REALLY know how to use the BB10 devices, AND have enough experience with other platforms to be able to speak intelligently about the pros/cons between them and BB, for instance the Crackberry Team! This, IMHO, would be the "dream team" marketing scheme for the future of our Waterloo friends!
In the meantime, I'm waiting, waiting, waiting for AT&T to announce their Z30 release!!

It would be an interesting twist on the US carriers if BBRY opens many small kiosks (see Microsoft's store at The Shops at Columbus Circle/Time Warner Center) in the US to sign up customers to these very same carriers. Making money on every customer they sign up while finding a useful solution to their inventory of phones. The customer commitment should be just enough to get the kickback from Verizon, AT&T and T-Mobile.

But can they wait for the 10.2 releases in the US?

As a large shareholder (by my RRSP standards) I am deeply underwater with $BBRY - I am happy that they did not take the $9/share deal and, better, that Prem Watsa is betting on a price above $10/share himself before he makes any real money.

Even today (5 Nov) the markets are up about 4% on $BBRY as the lemmings shift from panic and disgust to Reason. I am getting messages from my colleagues from Singapore, Montreal, Munich and elsewhere all commenting positively on the change - and especially the hiring of John Chen to manage that change.

I believe that this way of rebuilding BlackBerry is the best way - as a whole, optimistically, forward thinking - rather than breaking it up piece by piece. I am hopeful and optimistic now where I was simply frustrated and angry before.

Good article, Chris. I appreciate your perspective and ability to explain financials in layman's terms.

BTW, your article yesterday was quite clear.

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Good articles, Chris, both today's and yesterday's.

I completely agree this is a better deal and gives the company a shot at turning around the BB10 product line. Hopefully Chen will see the value in marketing "effectively"... unlike what they've done since February.

I understand about the need to focus on business customers... but if the Z30 had Vine, Instagram & Netflix, I think it would go a long, long way to breaking open the consumer market... especially if coupled with an effective marketing blitz.

BlackBerry needs to retrench, hence the massive job cuts. They are going to a much smaller company soon and it will be difficult to have enterprise cash flow support all initiatives, i.e. BBM4ALL, cloud services being just 2 business areas that are not generating any cash. The handset business is really just a lost leader for enterprise at this point. EvenZ30 sales will not be substantial enough to bolster cash flow
Glad to see Chen did not make the blunder of announcing an exit of the handset business. They can let this dog sleep, keep some handset business going without shaking up the market more by announcing an exit right away. Only time will tell if they can keep building handsets or,better, in my opinion, license BB10 to others to build handsets, which, in retrospect, they should have done with the launch of BB10.

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On the marketing side, it is easy to bash them, I have in the past.
But was the Z10 truly marketable? I think 10.2 is and that the Q10 could have been given the keyboard differentiation but the Z10? Not really although it is a fantastic device.
The Z30 comes in strong with super sound, super battery, super keyboard, great screen and 10.2. that you can market, back to what matters: battery, readability, hearability, efficiency. Want a screen? get a decent one not a half size one (like the iphone)...dont care about a screen? get a Q10 and hit that keyboard...

Here's what BlackBerry needs to do: start donating piles of money to feed starving children in third world countries. BOOM! Public perception of the company starts to rise and you start guilting people into buying BlackBerry. 'What? You don't have a BlackBerry? You like it when children starve?!' Once people use bb10, they won't go back.

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Unfortunately, the additional funding that BBRY got from Fairfax and others just makes analysts think they must be burning through money faster than they are letting on.
Damned if you do, damned if you don't!

Now let's get rid of the Z10 inventory at cost and with the $500 tax refund, we will be sitting pretty.

What BlackBerry has to stop doing is continually say that it is reviewing its options.
Yes, all companies should do that but stop making it seem like you don't have a plan for the future.

Tell people outright what you see as future sources of income. Tell them what you see as possible future sources of income. Everyone knows nothing is certain but if you can give some ideas of what your plan is without giving too much information to the competition, then it might settle down investors' concerns.

It is absolutely true, put yourself up for sale, did they think sales would increase eh?At the end of the day, oops, we're not for sale. What's a bil or two? down the tubes. BOD has a death wish for sure.

I'm new to the Blackberry world. Being with the smartphone evolution from Philips Nano to 3com Palmpilot to Symbian S90 to Xda Windows Mobile to IOS to Meego to iOS again and lastly, Android. I believe BB10 has great potential. It is actually a cross between Android and IOS but better in terms of communication capabilities. It is unfortunate though that we do not have that much apps but I think that will change soon.

Speaking of apps, I remember 8 years ago, i was asked by HTC to fill up a survey for the XDA Atom. I told them that a computer or in this case, a smartphone is only as good as the software on can install and use. Back then, it was only a dream. Apps were sparse and we do not have complicated software to run.

What I experienced 8 years ago is almost the same as what I am experiencing now. Except that BB10 is way better than WM 3.0 and there are more beautiful apps now even in BB10 than what we had in WM 3.0. Add to the fact that apps are also cheaper now than 8 years ago.

BB10 has lots of potential. What BlackBerry lacks is a good marketing plan. One that would leverage on it's strengths but capitalizes on what the market wants and at the same time continue to evolve to become better and more responsive to the market. The new management might be able to do this and more. Until then I cross my fingers. I want BlackBerry to succeed. However, the new BlackBerry management needs more of us to make it a reality.

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Hope the sales of this quarter will not drop down with all the negative stuff lately... Also M. Chen should to à better job than Heins... you have to sell the platform BB10 so that people will want BlackBerry!

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The market nearly always overreacts on news and corrects itself afterwards, so the initial market reaction doesn't bother me. I think that BBRY has a solid long-term plan. They just need time to execute it.

This was a good step. I believe on blackberry's Future. BlackBerry fell in tests but not for me. It is a good device but when they Changed strategy to sell blackberry device for only $300 then is this smarter. It was totally wrong to sell it in this high price range.

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Once again it's "wait for this....., hope for that..." while those behind the scenes at BBRY continue to chisel away at the inevitable tombstone.

I just wanted to remind everyone that it wasn't that many years ago when Apple stock was $5. / share. They started their turnaround without something as awesome as BlackBerry 10. I am optimistic!


Z10 on T-Mobile, 32 GB PlayBook - Posted via CrackBerry 10

6% paper with a 50% premium to convert to equity is a pretty favourable financing outcome for blackberry. There is no way they get those terms if Prem doesn't arrange the deal. Who knows what the future holds but they should have ample cash given the existing cash plus raise and the significant reductions to headcount. if opex gets down to the $400-$500mm level per Q, they wouldn't be burning much cash, if any. not sure how many Q's that will take.

Chris, what are your thoughts on the potential marching orders for Chen? Is he tasked with improving the business outlook and long-term viability for BBRY or is he just there to dress the company up for a better sale? I guess another option would be that he's just a placeholder with some credibility to allow the board time to either privately pursue a sale or to attempt to find a CEO that has a real shot at fixing this mess.

With now the right leadership BlackBerry can carve out its proper niche in the marketplace. The negative press gets disgusting.

So now, according to the Globe and Mail, Lenovo did show interest in submitting a bid for the purchase of BlackBerry. However when BlackBerry management met with Canadian government officials, it was made pretty clear that such a deal would not be approved...

While I do appreciate the fact that BlackBerry will survive to fight another day but having the Cryptkeeper hanging around, to me at least, is not really good news.

But it is Pringle Watsahisname's money that was deposited in BlackBerry's pot, so he is a necessary evil...

I just hope as I've said before, that the interim CEO, Mr. John Chen, is his own man and manages what to do what others failed to do, save BlackBerry and return it to profit margins and satisfied customers.

The last slap in this avalanche of bitchslaps, the fact that Heins Ketchup will leave with a multi million pat on the back. Funny to see how uncertain people are about how much money he'll leave with, it's $16 million, $55.4, $33 or $22 million if that makes a difference!

Winter Is Coming

I would. Be quite haappy to contribute an RPG or two to the armoury!

Go BBry Go! Now, lets see you come up with a seamless, understandable, slick and smooth marketing strategy that showcases BB10, the new devices and who truly rocks the best system on the planet.

Written with the superlative Q10..Z30 a coming!

thanks Chris, i was hoping to read another post from you on the topic, the stock tanked based on a sell off from people who were just looking for a quick buck on a privatization bid, no bid and they want out to cut their losses. nothing really changed as you said and alot of poor reporting skewing information as usual. more and more negative press is just making it harder for BlackBerry to gain traction and and eventually grow. i maintain one of the biggest problems for BlackBerry was the medias coverage of the decline in stock value, their poor management and execution of BB10 didn't help anything either. they did have their faults but the bleeding was increased by what i like to think was poor coverage of the stock and business.

anyway i'm on the edge about selling off my shares, i want to hear what their new business strategy is before i cut my losses, i'm down more then 50% and i don't want to be down anymore and if i see the new managment has come up with a good plan i might leave my money in, but man have we ever been burned by the poor execution from thorsten and his team

Hate on me all you BB fans want but for $399 I ordered the Nexus 5. Better over all Phone + some.
Sorry but BB needs to make PRODUCTS people want. People like me JOE Public.
Until that happens they will NEVER be a profitable contender.
Making the devices they currently make now will please the BB die hard but will do nothing to improve the over all image and sales.
Sorry but that is the truth. N5 or Z30 ? N5 and its not even close.

Didn't they mention on a previous earnings call securing a line of credit for favorable terms? So why tap another billion on what sounds like not an ideal rate (6%)?

6% is a very low interest rate for this type of company. The only reason it is so low is because it's a convertible bond and the equity upside offsets the low interest. No one would lend just for the interest rate. This is basically equity disguised as debt. It also has euqity upside, but a liquidation preference above the equity holders.

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Everyday I hear the comments and even get asked if Blackberry will exist in a year even five.
As someone in IT and in an environment where security is a concern, I respond by explaining how Blackberry is much more suited for business and security.
People aren't convinced by my answer.
It's almost like they want BlackBerry to fail, that the company deserves it.
It feels like a vendetta.
There is a pervasive cult/mob mentality of how great Apple is and how BlackBerry, Windows and Android are crap.
It will take a great deal of rebuilding before the idea that BlackBerry is not dead.
The tarnished public opinion is going to stick and there is not much Apple can do that will tarnish their products and make them look inadequate.

For me Z10 and BB10 rule....but I'm just a dumb IT guy.

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There's no way Fairfax or anyone could have raise money to buy BBY. The company is hemoraging cash. At current burn rates, even w the add'l $1B, it is reported that it would be out of cash by the end of 2014.

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Chris-The main reason Blackberry got screwed was due to the announcement of "Strategic Review" There was no need of the same. Many consumers and app developers decided not to go with Blackberry as they though the future was uncertain of Blackberry as a stand alone company. I guess it was a pressure from the institutional investors who wanted a quicker exit route. Imagine despite all the value Sum Of Parts whatever blackberry did not find even a single buyer who was willing to pay more than 4.7 Billion USD. Come-On stupid companies start ups are bought for 10x the sales. Look at yahoo they buy companies at ridiculously high valuations. No one paid Even like 5 Billion USD for Blackberry? And now Watsa tries to defend saying the debt for Blackberry's acquisition was expensive? As if these geniuses didn't know when they 1st announced the $9 deal. By doing this people who gained a little confidence that atleast Blackberry had some backing at $9 per share would now be even more pissed off. And $1 Billion is just a gimmick. Look at the terms it only favors Watsa and rest of the team. Watsa is desperate as he has his chunk at $17 so shall do everything and wont exit. God help Blackberry now. Why I write this? As I am one of Blackberry's most dissapointed investor. Not that I hate the brand I love Blackberry Brand and products but hate the way company is being treated by its board, CEO, CMO etc etc. The true dedicated people were the ones who lost their jobs due to foolish marketing efforts which screwed the BB10 launch.

The company is not in much of a different place than it was previously. If the financing comes through, it has a billion dollars more cash and a billion dollars more debt. That's a wash. It's still effectively for sale if anyone wants to buy it. It's a public company. Anyone can make a tender offer.

Fairfax is putting in $250 million to protect its own position. It will be interesting to see if they complete the balance of the financing. Arms length investors don't have the same motivation as Fairfax -- ie, they don't have an investment stake to protect. However, it would be surprising to announce that they have the financing lined up if they don't, but I haven't read the fine print of the announcement, excpet that Fairfax is putting in the first $250M and the deal is expected to take a month to get done.

I think it's a really ballsy play for a new arms length passive institutional investor. Needs someone with a Cowboy mentality and billions of dollars that doesn't care about getting it wrong. Those kind of people tend to like to be in control.

Will be interesting to see what develops.

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I don't agree that the sale process had a materially negative impact on the company. It can't have helped, but the company was already gushing cash flow, losing lots of money, exiting the consumer business, laying off massive ppl, etc.

Every company in that state is for sale. BBY is still for sale.

A series of strategic blunders and a poor competitive product offerings have gotten them into this soup. Not sure there's enough time to get them out, but I hope so.

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It wasn't that they couldn't come up with $4.7B, because $2.5b was in cash. So the real purchase price was just over $2B. Now, if the stock's down a third, the price is even further reduced.

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Good analysis. We need this kind of wisdom. I also agree that this is a good move, even though I think the strategic review itself has been a disaster, and particularly a huge waste of executive time. I have been around the world recently and everywhere everyone who knows anything about BlackBerry figures it's dying. This sort of review should have been done in secret if at all. Consumers want confidence not corporate structure. They do not want to hear about for sale signs etc. So sales are down. Ok. And bad financial results will get reported. The stock price goes up and down. The competition is really tough. But in the process, give BlackBerry credit, they have launched four highly competent bb 10 phones in the past year, including the release and update to a whole new and innovative platform. Software is maturing. Christmas is coming. Forget the idea of prosumer or whatever and SELL. It has its product line in good shape. It's army is ready. Fight. The new executive needs to show presence and display CONFIDENCE. Put phones on sale.

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If BlackBerry wants to compete, they have to compete. Right now the Z10 is $300 bucks at T-Mobile versus $150 for iPhone 5c. (2 year corporate plan). Gee Whiz, how come our handsets are not selling? BlackBerry will need to spend some of its cash to stabilize market share. Or wither away to zero. It is that simple.

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