DP column 1.11.2013: Is Blackberry on the RIM of collapse?

Is Blackberry on the RIM of collapse?
Puff goes the magic dragon

As one-hit wonders go, Research in Motion (RIM) once took the mobile phone market by Storm. Selling handsets with emailing capabilities was not just a Bold idea, this sent a Curve ball to competing manufacturers primarily focused on a simple user interface. By 2007, RIM not only lit the Torch for loyal followers, it ignited rival manufacturers hungry for market share. In the eyes of the consumer, their Blackberry became the Pearl in their pocket. Today, Blackberry are the ones taking a Tour of the industry, catching up to their competitors and will need to look at re-writing their once dominant Playbook in order to be on the field.

Blackberry has entered into a preliminary deal with Fairfax Financial to take the company private for a value of $4.7 billion. Blackberry’s largest asset is their patent portfolio, worth (sceptically) $3.5 billion according to their balance sheet. The key selling feature, but a potential conflict. Their secure network is used for communications and information storage, it’s also used by Canadian and US government agencies. An approved purchaser of Blackberry will have to be North American, preferably Canadian. A foreign buyer (e.g. Lenovo) gaining control would be restricted by the regulatory body. Recent scandals regarding WikiLeaks and Edward Snowden has brought to light the value of secure data. Sometimes, a price cannot be paid, luckily in this case, there appears to be ‘willing buyer willing seller’. Both the Ontario Teacher’s Plan (OTPP) and Canadian Pension Plan (CPPIB) with large holdings in Blackberry, are reportedly going to join Fairfax Financial in the leveraged buyout. Considering numerous large investment funds and tech industry giants have expressed interest, Blackberry’s price-to-book value of 0.44, means any reasonable deal is likely. If it doesn’t, the interests of government agencies and secure network users will be in jeopardy, giving rise to question what alternatives exist. As little to no alternatives appear feasible, Blackberry’s near future for an acquisition will require a mountain of work to return Blackberry to a forefront. Motorola mobility and Nokia are key examples of one-time industry leaders being swallowed up by larger companies, yet their presence in today’s market can hardly be seen. With direct competitors from MobileIron and Airwatch who both provide secure networking services, Blackberry will need to get the think-tank rolling again.

Today’s technology industry is not for the faint-hearted, it never was. RIM were largely caught off guard with their success in consumer sales and were unable to retain market share as Android and iOS took off. Regardless of whether Blackberry are taken private or acquired as a subsidiary, its current value and potential are enormous. With BB10 and BBM being re-launched to the public, we will see whether the black dragon has enough steam to get puffing again.


PDF: Is Blackberry on the RIM of collapse

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