Blackberry Faces More Uncertainty With Change in Management

05 November 2013

Struggling enterprise services provider and smartphone manufacturer Blackberry announced another change in management less than two years following the departure of long-time co-CEOs Mike Lazaridis and Jim Basille. It also announced that plans for $4.7 billion buyout by its largest shareholder, Fairfax Holdings, were scrapped in favor of an injection of $1 billion from Fairfax and other investor in another attempt to turn around the fortunes of the ailing Canadian company.

  • The move away from Thorstein Heins as CEO is not surprising. Blackberry has continued its downward slide under his leadership with no sign of renewal or direction. Promoted from within, Mr. Heins proved to be cut from the same cloth as the former leaders. Mr. Heins committed to trying to make Blackberry relevant again in the consumer handset market soon after taking over, but the launch of the new operating system, Blackberry 10, and new high-end handsets such as the Z10 and Q10 have failed to generate many sales. In fact, in its most recent quarterly report, Blackberry took a $934 million write down on unsold inventory, mainly compromising of the all-touch Z10 model. It also recently announced a refocus away from the mainstream consumer handset market towards its enterprise products.
  • Mr. Chen on the other hand has history in turning around a struggling company. He took over as CEO of SyBase in 2000, returned the company to profitability and sold it to SAP for $5.8 billion in 2010. SyBase was an enterprise services company with a focus on mobility; meaning Mr. Chen comes to Blackberry not only with experience, but with industry know-how as well.
  • While, Mr. Chen has already committed to keeping Blackberry’s smartphone business, he was careful to avoid overpromising in that regard. Blackberry is poised to ship under 20 million handsets in 2013, a 63 percent decline from its record volumes in 2011. IHS predicts Blackberry shipments will fall to under 5 million by 2016 as the company retreats from mainstream consumer markets and focuses on its enterprise customers. Instead of handsets, Blackberry will be looking at its enterprise services as its engine for recovery.
  • The change in leadership and ongoing uncertainty over the company’s future directly affects its ability to grow its enterprise services business. Large enterprises place a high value on stability when investing in their IT systems. Further restructures and changes in strategic direction are likely; compounded by uncertainty over the role of whoever the new CEO will be and the precise role Mr.Chen will play once the new CEO is hired. The ongoing uncertainty over Blackberry's future will at the very least delay some purchasing decisions and possibly even lose some sales for Blackberry.
  • This in turn places even more pressure on Blackberry's cash position. The company burned through $500 million of its cash in the last quarter leaving it with $2.6 billion in cash and equivalents. While the extra $1 billion investment gives Blackberry more security, potential future restructuring under the new management will eat into that again.

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