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VENTURES AFRICA – Blackberry has shelved a proposed sell-out to leading shareholder, FairFax Financial Holdings, opting rather to source for a $1 billion investment in fresh financing move.
The Canadian smartphone maker has grappled with depleting revenues in recent years, posting a Q2 net loss of $965 million last month, owing to poor sales of its “revolutionary” Z10 model.
In August, the company disclosed that it was exploring strategic alternatives including a sell out, prompting FairFax, which controls a 10 percent stake, to propose a $4.7 billion buyout plan.
However, with reports suggesting FairFax was struggling to come up with the funds required for the takeover, Blackberry has decided to focus on external investors that will provide solid financial base for short-term restructuring plans.
“This financing provides an immediate cash injection on terms favourable to Blackberry, enhancing our substantial cash position,” said Barbara Stymiest, chair of Blackberry’s board of directors.
FairFax will lead the consortium of investor’s chart by staking $250 million in an agreement that will see current Chief Executive, Thorsten Heins step down and former Sybase Chief Executive, John Chen take over as interim CE. The management shake up could also open a new window for a strategic rethink, if Blackberry aims to reclaim its lost market share.
The smartphone market has become fraught with steep competition, as other phone makers such as Samsung and Apple have flooded the market with cutting edge devices while Blackberry continues its struggle in key markets in Europe, the Middle East and Africa (EMEA).
Despite the drop in sales, the region still provided $1.573 billion or $44 percent of its total earnings this year, offering hope that a change in strategy might have a positive impact on its earnings.
With the potential inflow of cash and a change in management, the company might channel a portion of the fund into reclaiming these strongholds by redesigning its product line to satisfy current market taste.
An alternative strategy could also see the company utilize investment proceeds to grow its messaging platform. The recent launch of Blackberry Messenger (BBM) on Android and iOS has yielded encouraging patronage, with 20 million new users recorded in its first week. Thus, the company might focus on consolidating its position as the leading mobile messaging platform by driving funds into marketing and business development for the app.