BlackBerry released a statement in August that it was planning to go private. Fairfax Financial Holdings CEO Prem Watsa stepped down from the company’s board of directors after it declared its intention to go private. Watsa cited a potential conflict of interest as the reason for his decision.
The smartphone maker’s fortunes have declined in the past five years. In 2008, its stock was at a record high of almost $145. BlackBerrys were seen as a status symbol amongst business users. However, the devices lost ground to the popular Apple and Android platform phones. In the past year, the stock has traded as low as $6.22 on the NASDAQ.
BlackBerry tried to reverse its slump by releasing its next generation operating system, the BlackBerry 10, earlier this year. Global sales have been disappointing, though. At the end of last week, BlackBerry announced that it had $1 billion in unsold smartphones. In the same statement, the company noted that it would cut 40% of its workforce.
Although the deal with Fairfax Financial Holdings would appear to save BlackBerry from ruin, it is only a preliminary step in a much longer process. The buyout is subject to six weeks of due diligence on the part of Fairfax. During that period, BlackBerry can entertain other buyout offers. Analysts have expressed skepticism that anyone else will come forward with a competing deal. Moreover, Fairfax still needs to find financing for the buyout. Most importantly, the deal does not compel the financial holdings company to come forth with a firm offer.
Even if the deal gains approval, analysts wonder what Watsa and Fairfax could do to save BlackBerry that its CEO Thorsten Heins and his team have not already tried. While going private would mean that BlackBerry would escape public scrutiny, it might not be enough to guarantee the firm’s future.
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