Resuscitating BlackBerry

The German-born surgeon, who was asked two years ago to lead the medical team, has of course been replaced, adding to the chaos surrounding the sickness of this one-time goliath whose parents had given the previous expatriate surgeon full autonomy to manage the patient’s sickness. The question now is whether or not the patient will […]

The German-born surgeon, who was asked two years ago to lead the medical team, has of course been replaced, adding to the chaos surrounding the sickness of this one-time goliath whose parents had given the previous expatriate surgeon full autonomy to manage the patient’s sickness. The question now is whether or not the patient will survive and walk again in the hands of the new medical team.
Okay, that was a silly metaphor in the previous paragraph, but I am sure you get the scoop. The old surgeon is of course BB’s outgoing CEO Thorsten Heins, who was replaced last week, and John Chen, former CEO of Sybase, an enterprise company (like Oracle and SAP), was picked to act as an interim CEO of BB. BlackBerry’s “parents” of course were the co-founders/co-CEOs Mike Lazaridis and Jim Balsillie, and the company was obviously once a high-tech goliath, not minding Malcolm Gladwell’s recent interpretation of the biblical “David and Goliath.” (The German company SAP has since acquired Sybase, which Chen headed and dramatically turned around.)
To be sure, BB is still very, very sick, and its eventual demise is still a possibility. In fact, the company has been bleeding profusely in the last few months, writing-off in September 2013 nearly $1 billion in unsold inventory of its new line of smartphones, including the touch-screen Z10 model. There have also been steady layoffs, including 4,500 in September 2013. This former high-tech innovator has suffered from big-time service goof-ups, coming two-years late into the smartphone business which the company actually helped create, and failing to form partnerships. In the wake of the company are of course a few remarkable innovations. The superior security features of BB phones helped push the devices into the palms of senior corporate executives and government people.  BlackBerry also introduced wireless e-mail to the planet, an innovation that is reminiscent of, but precedes, the smartphone. The BlackBerry Messenger (BBM) also elevated the tech portfolio of BB. Unfortunately, as it stands, these attributes by themselves are not sufficient to prevent the deterioration of the company. In today’s tech landscape, you have to keep innovating to at least stay on the curve.
The story of Google’s Android operating system (OS) does hint on the importance of partnership – just watch the high-flying Samsung laughing profusely to the bank on the back of Android, while Google itself  is making a killing from ads in the devices of numerous companies like Samsung that use Android. At the time that Heins took over as CEO, big tech companies like International Business Machines Corp. (IBM) and Hewlett-Packard (HP) showed interest in partnering with BB, at least in the services sector, but Heins declined and instead decided to pursue his new line of smartphones, which came two years late, leading to the unsold inventory and write-off alluded to above.  
Blackberry’s fate can’t wholly be blamed on Heins’ apparently ineffective performance, for the company had already begun to struggle by the time Heins took over. Heins is known to be an expert on handsets, but inexperienced in sales. As it turned out, staking the future of BB on a new line of phones using the new BlackBerry 10 operating system was Heins’ crime, since these products came too late, in the shadows of the iPhones and the Galaxies!
Frustrated and despondent, BlackBerry put itself out for sale after all efforts to hold on failed. According to Will Connors (Wall Street Journal, 4 November 2013), BB’s bankers, which include J.P. Morgan Chase & Co. and Parella Weinberg Partners, have been reaching out to tech companies, including Facebook, Oracle, and LinkedIn, to discuss potential bids or business partnerships. There are also rumors that Apple, Google, and Microsoft had been contacted for their interest in BB. There have been joint bids for BB, such as that by the two BB’s co-founders, partnering with Cerberus Capital Management and Qualcomm Inc., a mobile-phone chip maker. The Chinese company Lenovo has even shown some interest in acquiring BB.
As of a few days ago, BB’s efforts to find a buyer failed, and a tentative $4.7 billion plan to take the company private has gone bust. So the company has decided to restructure and remain public. This means the company will accept an investment of $1 billion and replace Heins. The investment is coming from Fairfax and a group of institutional investors. The investment will come via debt securities that can be converted into common shares at the rate of $10 a share. Mr. V. Prem Watsa, the Chairman and CEO of Fairfax, owns the largest share (10%) of BB.
John Chen, CEO of Sybase from 1998 to 2012, replaced Heins as the interim CEO of BB. Chen is known for having saved Sybase from imminent bankruptcy, when the company had lost a significant portion of its database business to IBM, Microsoft, and Oracle. Chen also expanded Sybase into developing software for creating applications for use in wireless mobile devices and to manage wireless networks.
Mr. Chen’s appointment might be signaling a move of BB in a new direction. That is, Mr. Watsa might be planning a BB future based on software and services, not handsets.
The main idea in this article is that BlackBerry, having failed in its bid to be acquired, might be going in a direction that does not involve smartphone devices per se. An interim CEO has been appointed to replace Heins.