BlackBerry (BBRY) has definitely been the talk of the town since Fairfax Financial announced its intention to try and float a bid for the company at $9.00 hot on the heels of a $1 billion quarterly loss including a $934 million "provision" for supply commitments and unsold devices. Scavengers have circled and a number of parties are reportedly picking over the bones including Intel (interested in patents only), Samsung, Microsoft, Cisco and hedge fund Cerebrus. Canada's foreign investment review policies will no doubt further complicate any progress.
No doubt the board and management are having almost daily meetings and the head office is agog with activity as they field the potential sale of all or part of the company while the company lays off at least 4,500 people; closes redundant facilities; disposes of surplus real estate; and, negotiates settlement of patent disputes, all in preparation for what might come next.
In the meantime, competitors like Apple are starting to poach talent, customers are deferring purchases looking for clarity, and the company looks rudderless.
Is it not time to calm down and operate? There are a number of immediate decisions management could take that might settle things down.
- Try to convert the supplier commitments into production by switching to Android OS for a range of devices. Since the BES 10.1 enterprise software now supports Android OS, this would not be such a big deal but it is likely that BlackBerry could sell a lot of its devices with the Android OS and its vast library of applications.
- Bring back traditional BlackBerry device designs including the mini-track pad, the "back" button and the "lift receiver" and "hang up" buttons. These are features that millions of BlackBerry users have come to expect and want on a BlackBerry.
- Sell the massive pile of finished Z10 inventory unlocked and direct to consumers as well as through existing channels at a price that is "recovery" motivated. An unlocked Z10 for $149 and no contractual commitment would very likely sell well, and if that does not work, try $99 and $59 but move the product. It is a very solid device and there are markets worldwide where BlackBerry is still in demand.
- Set a firm deadline for the sale process with an end date. All bids to be in by November 4, 2013. Neither the highest nor any bid may be accepted. In the event the board does not accept any bid, the company will continue to operate.
- Get BBM cross platform into the market place and do it soon. This fiasco has done more to harm BlackBerry than its foolhardy commitment to buy millions of devices from suppliers in advance of any real effort to size demand. It was poorly organized and clumsily handled and annoyed a lot of people who are customers for BBM.
- If no sale is approved, do an immediate rights offering of 1 share for every 4 held at $5.00 a share. Nothing separates the sheep from the goats faster than having to put money on the table. The shorts are likely to buy and exercise the rights since it is a convenient exit for them, and the company will raise some $500 to $600 million of new funds.
I was an executive with the Canadian unit of General Electric when under Jack Welch's strong leadership the company shed tens of thousands of employees and shuttered hundreds of facilities. The repositioning of GE was done through careful planning and execution, without drama or bad press. It can be done with BlackBerry as well. It is time to get on with it.
I hold BlackBerry calls and some puts. None of them look like good investments today.
Disclosure: I am long BBRY. 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.