BlackBerry abandoned its sale process Monday and announced it will replace its chief executive.
Fairfax Financial, BlackBerry’s largest shareholder with a 10 percent stake, said it won’t buy the struggling smartphone company and take it private but said that Fairfax and other investors will inject $1 billion as part of a revised investment proposal.
BlackBerry said CEO Thorsten Heins is stepping down. Heins took over in early 2012 after the company lost billions in market value, but he failed to turn the company around with BlackBerry’s new devices this year.
Former Sybase chief executive John Chen has been appointed chairman of BlackBerry’s board of directors and will serve as interim CEO. Chen’s emphasis on software in an interview with The Associated Press could mean the company might ultimately get out of selling smartphones.
Chen said he’ll be looking for a CEO with a strong software and services background. He noted that BlackBerry Messenger, the popular messaging application, has been downloaded by more than 20 million users since it became available on Google’s Android and Apple’s IOS platforms.
“I’d like to find somebody to help me monetize that,” Chen told the AP.
Chen said a solid team is in place, but they need to focus. “Maybe I can help that. More of a transitional thinking of we’re really not in phones but we’re in phones for software, for services,” Chen said.
Chen also said he wants to focus on business users.
Fairfax head Prem Watsa will be appointed to the board. Watsa said Chen did a terrific job of turning around Sybase, an enterprise software data management company. Chen was chairman and CEO from 1998 until the company was acquired in 2010 by SAP AG.
“He joined in 1998, and the company was going through similar problems, the stock price was down 90 percent, four years of losses; John joined them and had one of the best track records that I have seen,” Watsa said.
Watsa said he remains a fan of Heins’. “I think Thorsten did a terrific job given the hand he had been dealt.”
BlackBerry announced in September that Fairfax Financial Holdings Ltd. signed a letter of intent that contemplated buying BlackBerry for $9 a share, or $4.7 billion, and taking it private. Fairfax said then it wouldn’t increase its 10 percent stake, and the company went about trying to attract other investors.
Watsa said they did due diligence and worked with a consulting company that recommended that taking it private with borrowed money was not the way to go.
“To load this company with too much debt was not appropriate,” Watsa told the AP. “We didn’t want it leveraged. We didn’t even bother to go there. Once we decided that a leveraged buy-out with high debt was not appropriate we didn’t push it any further. We backed off completely.”
Watsa said BlackBerry needs financial flexibility. “We probably could do it, but we decided not to add high- yield debt to the company’s capital structure,” he said.
He said five or six investors had been interested in a buyout.
BGC analyst Colin Gillis said the failure to complete a successful sale was not an unexpected outcome for the market because the stock was trading well below the possible $9 bid price.