Private deal doesn't solve BlackBerry crisis

Following BlackBerry's US$4.7bn deal with Fairfax Financial, analyst group ovum believes taking the business private doesn’t solve the fundamental problems at the company.

The struggling Canadian smartphone maker’s decision to go private follows a warning that the company could lose nearly $1bn during the next quarter.

Announcing job cuts of up to 4,500 earlier this week, many analysts claim BlackBerry’s business has simply “sailed off a cliff" - a view Ovum's chief telecoms analyst Jan Dawson agrees with.

"First, the company’s device sales are cratering, and its announcement last week that it no longer intends to pursue the consumer market is essentially the death knell for this business," he says.

"BlackBerry’s supply chain relies on scale for profitability, and it will never again be able to achieve the scale necessary to make money on devices.

"It’s likely that BlackBerry will be out of the device business entirely by the middle of next year."

Dawson believes the next challenge is that BlackBerry’s other businesses are all to a greater or lesser extent dependent on its devices business.

BlackBerry Messenger’s installed base is entirely on BlackBerry devices, and its launch on iOS and Android was aborted over the weekend.

"It’s mobile device management business is entirely based on its ability to manage BlackBerry devices, and its cross-platform management is much less well established than those of major competitors like MobileIron and Airwatch," Dawson says.

"If you strip out BlackBerry’s use of its QNX operating system for BlackBerry devices, you’re left with a business that’s worth less than $100 million."

Dawson claims about the only part of BlackBerry that looks to be worth a significant amount at this point is its patent portfolio, and that "certainly wouldn’t justify the purchase price on its own."

“Normally, companies are taken private in order to give a long-term strategy time to payoff without the hassles of short-term investor scrutiny," he adds.

"But BlackBerry’s key problem for the last couple of years has been the lack of such a long-term strategy.

"It simply hasn’t articulated a way to rebuild its business as its device sales drop precipitously."

Unless Fairfax plans to radically change or accelerate BlackBerry’s strategy, Dawson thinks it is unlikely to be able to turn the company around.

"And that means we’re likely seeing the beginning of the end for one of the most iconic brands in mobile technology," he concludes.

Will BlackBerry survive?