Today marked yet another critical point in BlackBerry’s future. Thorsten Heins has been ousted as CEO, with John Chen elected as its interim CEO.
Additionally, Fairfax Financial announced they were easing off a USD $9 per-share bid after determining it was a mistake garner BlackBerry with high-yield debt under a planned buyout.
Instead, Fairfax Financial’s Prem Watsa wants to build up BlackBerry, keeping its hardware business, and not split it up as rumored. Fairfax Financial, who owns 9.9% stock in BlackBerry, is leading a USD $1-billion convertible debenture financing, putting up one-quarter of the amount itself. The debt can be converted into 16% of the company’s stock and will pay 6% interest in the meantime.
“We looked at it and said, ‘Hey, a high-debt situation was not appropriate,’” said Prem Watsa in an interview with the Globe and Mail. “We wanted to take the ‘For Sale’ sign down, get John Chen as executive chairman as soon as we could and finance it for the long-term,” Mr. Watsa said. “That’s effectively what we’ve done.”
The financing plan is expected to offset the “cash burn” that may last for the next four to six quarters, depleting the company’s $2.6-billion in cash and investments as of Aug. 31.
“Why would you buy a BlackBerry system or a BlackBerry phone if you think the company is not going to survive? Well, that’s out. BlackBerry is here to stay,” Watsa said, adding “There’s no question” the very public strategic review and uncertainty around it hurt the company’s business prospects.
“Convertible debt at 6% is just the appropriate financing,” Mr. Watsa said. “This financing will help us go through that [cash burn period] and for John to have the financial soundness to build this company over time.”
BlackBerry’s new interim CEO, John Chen, believes the company has “different buckets of good assets,” including its business serving corporate and government customers, its secure network, its patent portfolio, BlackBerry Messenger instant messaging service and software developed by its QNX division that enables machines to communicate with each other wirelessly, such as systems in automobiles that can interact with dealerships.
“We have all the ingredients to become the leader in that embedded machine-to-machine space,” Chen said. “I figure with our focus and [by thinking] long term, do the right thing today, a step at a time, I think we’re going to build tremendous value for shareholders.”
via Globe and Mail