Let me make one thing absolutely clear from the beginning: I am not, and have never been an investor in BlackBerry. I have no affiliation with the company whatsoever.
As a shareholder activist it stuns me that a company like BlackBerry (BBRY) can get away with an atrocious abuse of shareholders like they are doing. BlackBerry shareholders are being pummeled and manhandled into submission and it is costing them billions of dollars. It is a sad case of corporate greed and incompetence run amok and even to a person like me who has no financial stake in the company whatsoever, it is a shocking and painful show to watch.
Shareholder Manipulation and Market Lose
BlackBerry shareholders, I honestly feel sorry for you. I am angry. You have been stripped, tarred and feathered in a veritable Shakespearean tragedy. BlackBerry's demise is a travesty and an embarrassment. It's not caused by a lack of innovation or a technology that has been surpassed by competition. The core BlackBerry products are not obsolete and antiquated. Rather, all the problems which have converged to kill this company have stemmed from management. By lack of clear focus. By infighting within the executive core. Ambiguous marketing and disorganized product launches. By executives who continue to believe that there is no problem, because their paychecks rely on them holding this line of thought.
Management has profited. Shareholders have suffered. A lot of people are losing and in fact will continue to lose a lot of money. Management has destroyed $75 billion of market capitalization in the last 5 years. The bleeding has not stopped. In fact management has denied on many occasions that BlackBerry was ever bleeding at all. Management's ego and reluctance to admit blame has been the chief cause of the distress in the company. What was once a great company, growing faster than any other company in the world, and the most valuable company in Canada has been reduced to a corporate punch line. It's a shame. It's a textbook case that will be reviewed by students, as a clear lesson on what happens when management abandons and ignores its shareholders. How can it be that a company can go, in the span of 2 years, from having a global subscriber base of over 80 million users, to losing almost $1 billion in a single quarter? How can a company go from a position of dominance within an industry with a US market share of over 50%, in a market which it in fact invented, to now see its position whittled down to a share of barely 4%?
Technology Is Not To Blame
I would love to sit here and write that Blackberry simply had an inferior product which was surpassed by a fast growing industry with high competition. That consumers simply made a choice to choose another technology and the company was helpless. But this would be a complete lie. Blaming technology is a scapegoat. It has been said many times before and I will say it again with conviction: BlackBerry engineers and software developers are top rate, with Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) both actively trying to poach BlackBerry's talented pool of designers. And in a head on comparison, BlackBerry's flagship products perform just as well as those released by Google and Apple.
There are the Apple fanboys,the Android phandroids and the CrackBerry enthusiasts all clamoring to shout over each other. But in the end, from an unbiased perspective, can any side honestly claim that their technology is absolutely superior in all possible ways? No. Like any business, technology and consumer adoption plays a big factor in success, but strategy and execution on a corporate level is just as important. You can have a million fantastic ideas, but in the end it all comes down to how you effectively create, produce, market, sell and manage those products. Apple and Android have done fantastic jobs. Even Microsoft (NASDAQ:MSFT), the lumbering giant that it is, has finally taken notice and is starting to at least make an effort, after coming so late to the race. But for BlackBerry, after inventing the smartphone market, dominating with their marketing and product execution and winning over a generation of consumer and enterprise users; where did the wheels fall off?
Management Is To Blame
The blame clearly and squarely falls on management, and they deserve to be sued for years to come from the millions of shareholders that they cheated out of billions of dollars. Board members, CEO, CFO, COO, they must all be called out and held accountable for this mess. Their names must be in the headlines, they should be publicly shamed with the hope that in the future they will not be able to do this to another company.
Management is responsible for the service interruptions which shook consumer trust in the network. Management is responsible for the numerous PlayBook delays, disastrous launch and failure. Management is responsible for the series of job cuts affecting over 10 000 workers which disrupted production and killed morale exactly when it was needed most. Management is responsible for the infighting which caused co-CEOs Jim Balsillie and Mike Lazaridis to step down in 2012 leaving the company without focus or direction. Management is responsible for the repeated delays in the launch of the BlackBerry 10 as competition started to eat into their market share. Management is responsible for the failed turnaround strategy and corporate restructuring. Management is responsible for never acknowledging that competition was slashing away at the BlackBerry core used base. Management is responsible for denying over and over again that there was any problem whatsoever in their strategy even as market share evaporated and losses mounted quarter after quarter. Management is responsible for the huge glut of unsold inventory which it accumulated, resulting in a $934 million writedown last quarter.
Shareholders Should Be Enraged
Shareholders, you deserve an apology. You deserve an apology and a refund, although you will receive neither. Sure, there will be lawsuits, foreclosures, pain. Everybody will be pointing fingers. Everybody will say that it was not their fault. In the end, the executives will climb into their black SUV's, or fly off on their newly purchased private jets. They will go back to their mansions and continue living their fabulous lifestyle that was paid for with ridiculously high salaries, stock options, and performance bonuses.
Blackberry CEO Thorsten Heins will reportedly pocket a $55.6 million payout, including a "special performance bonus" tied to the launch of the failed 10Z series of phones, which drove a nearly $1 billion loss for Blackberry in the recent quarter.
These people were eager to collect their paychecks but were never around when it was time to focus on the future and to figure out how to make the company work. These people will not suffer. They will find other jobs. These people don't even need to work again for the rest of their lives.
Economist Max Wolfe perhaps summarized it best when he stated:
"This looks like a story of people making sure they're taken care of, even if the company, the employees, the area where in which the company does its manufacturing, its partners and the public are in no way taken care of."
For the shareholders who saw BlackBerry as a promising, growing company, who put their faith in management, who trusted that executives would focus on the competition, the future of the mobile market, identify opportunities and do the right things in order to capitalize on those opportunities, you are left holding the bag. Management put the final screw in the coffin by declaring that their best hope was to sell the company. And honestly, they were not even able to do that correctly. BlackBerry's market capitalization is in fact lower now than before Fairfax Financial made their ridiculously low takeover offer. And not only did management destroy their bargaining power by immediately accepting the low ball offer, but they agreed to pay a huge breakup fee in the event that a better deal materialized.
BlackBerry the Black Hole
It seems that at almost every step along this rocky path, management has done everything in its power not to increase shareholder wealth. Through persistent incompetence they have managed to erode the BlackBerry brand, burn cash on worthless endeavors, flub product launches and alienate consumers. Management's sole concern is to strip whatever money they can from BlackBerry while there is still something to get. Once they saw that they would be unable to stage a proper comeback to regain a sustainable share in the mobile device market, they could have focused on creating software and business solutions. Failing that, management could have explored options to maximize shareholder returns by either selling the company off in pieces, or slowly winding down operations and milking their existing cash flow with the intention of returning shareholder equity in the form of a dividend. Management chose to do none of this. Rather, they decided to accept a low-ball offer from the first bidder, thereby securing their precious golden parachutes. Rather than fixing the company and increasing shareholder wealth, the CEO, with the backing of management, chose to sell the company in a hastily arranged deal and take advantage of a $55 million payout. As shareholders are forced to accept a takeover deal which values BlackBerry at less than book value, the top five senior executive stand to float away on golden parachutes valued at over $80 million in severance payments. Congratulations BlackBerry executives, you have given a new name and face to corporate greed.
A Unique Failure
What has happened to BlackBerry is unique. It is absolutely not a common occurrence. Surely there will be headlines in the media about how this is an example of what occurs when technology runs away from a company. But this is certainly not something that happens often. A failure of this size is something that takes effort to perpetrate. You can look at other "seemingly similar" examples like Kodak (NYSE:KODK), that went bankrupt last year, or Xerox (NYSE:XRX) that suffered a dramatic fall in the late 1990's, or on a more recent note, you can point to Nortel's failure or even Palm's demise. But these cases are all remarkably different. Kodak suffered from a complete evaporation of their core industry. Xerox had a terrible balance sheet smothered in debt and pounded by competition. Nortel was an unprofitable company with vast overcapacity. And Palm was a quintessential also-ran with perpetually weak financials and shoddy technology. On the other hand, BlackBerry was an industry leader from the beginning, with strong technology and a dominant market share. It's balance sheet was and continues to be very strong. The market where it operates is still one of the largest growth opportunites in the world. It seems that with all these positive notes, BlackBerry should be an industry leader, or if not, at least a player with a chance of success. Rather, it is a company on the brink of failure.
Neglected and abandoned by executives. Siphoned of money, talent and technology. In a final sad sign of lack of creativity or desire to succeed, BlackBerry executives decided to sell the company. But even that is showing to be a failure. Who would want to buy a company which has been left to crumble for so long? Clearly, competitors and people in the business community who have the means of taking over BlackBerry understand the degree to which the company has been damaged by greed and incompetence. Even at a valuation far below book value, they are refusing to make offers for the company. Even Fairfax Financial Holdings, after making a buyout offer which BlackBerry shareholders almost unanimously decry as being far too low, is having immense trouble finding anybody to finance the deal.
To repeat myself, I am not a BlackBerry investor, nor have I ever been. I have followed the company throughout the years and there have been many instances when I wished that I owned shares and in fact regretted not buying. In the end, I never had the courage to buy. In hindsight, I don't consider myself lucky or smart for resisting the urge to be a BlackBerry shareholder. BlackBerry was always an appealing company and always seemed to be an interesting investment. Shareholders cannot be blamed for believing that BlackBerry management could be trusted to continue growing the company. But now, as BlackBerry drifts into oblivion and shareholders stand to lose billions of dollars, we must all take notice and place blame where it is deserved. BlackBerry shareholders, you have been sold down the river by management and executives. You have been used and abused and are now being tossed aside. While the people in power drift away with millions of dollars in their pockets, you will be left circling the bowl before being flushed away.
The writing is on the wall ladies and gentlemen. For people working at BlackBerry, it is a race to the exit and for executives in charge, it's a race to cash out while they can. For shareholders it's a race to the bottom. As a person who has no financial interest in the company, I am angry to see this sad story unfold. I can only imagine how shareholders feel. I hope that in the future shareholders can at least see some justice by holding management accountable in a meaningful way for destroying this once great company.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.