A breakup may be on the horizon for BlackBerry

A breakup may be on the horizon for BlackBerry

Set to be acquired by Fairfax, BlackBerry says it will 'refocus' on its core enterprise business even as Gartner advises clients to ditch the vendor's products.

The likely buyer of troubled BlackBerry, Fairfax Financial Holdings of Toronto, faces a tough road after the close of the $4.7 billion deal, expected next month.

Many analysts say it's likely that the new owner will break up the company, wiping out its smartphone division while preserving BlackBerry's secure network services, which are used by large enterprises around the world.

"What else could Fairfax do other than sell it off in parts?" said Gartner analyst Carolina Milanesi. "[It has] no knowledge or assets to bring to the table, so how could they address the challenges that BlackBerry was facing?"

That feeling is widespread among industry observers, but not unanimous.

"[BlackBerry] faces a huge mountain to climb to get back into the device marketplace," said Jack Gold, an analyst at J.Gold Associates. However, he added, "I don't believe that breaking up the company is the right way to go... there's more [long-term] value in keeping the three parts -- devices, services and collaboration -- intact."

Fairfax and BlackBerry's board agreed to the takeover late last month, days after the smartphone maker quantified just how bad its business is, projecting a $1 billion loss for its fiscal 2014 second quarter, which ended Sept. 30, on sales of $1.6 billion -- 45% lower than a year earlier -- and announcing plans to lay off about 4,500 of its 12,000 workers. Fairfax currently controls 10% of BlackBerry's stock.

At its height, BlackBerry, as Research In Motion, controlled half the smartphone market for years. It now has market share of just 3% or so. Under Fairfax, it will be a "much smaller and less important player" but will at least survive for a while, said independent analyst Jeff Kagan.

"This is probably the best possible outcome of several unattractive options for BlackBerry," Gold said. The deal -- and Fairfax's plan to take the company private -- gives BlackBerry officials time to restructure the company without having to deal with investors "breathing down their neck," he added.

"But it won't be easy. Negative press can be a self-fulfilling prophecy, and the market may not be kind to them even if they do provide innovative products and services," Gold said.

In a preliminary announcement of its second-quarter results, BlackBerry said that it is restructuring and plans to "refocus" on its core enterprise business. "We remain steadfast in our mission to deliver the most secure and powerful mobile management solutions and smartphones," the company added in a statement emailed to Computerworld.

Gartner made that mission harder when, shortly after the Fairfax deal was signed, it issued a report in which it advised clients now using BlackBerry smartphones and management software to find alternatives by early next year.

Analyst Ken Dulaney, author of the Gartner report, said he made the recommendation after clients raised concerns following the recent spate of bad news at BlackBerry.

Dulaney's report noted that, in a Gartner survey of 400 IT and business leaders in August (before the run of bad news), 42% of the respondents said they now use BlackBerry smartphones, but only 9% said they would still be using them in 2016.

Martyn Williams of the IDG News Service contributed to this story.

This version of this story was originally published in Computerworld's print edition. It was adapted from an article that appeared earlier on

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Tags mobilesmartphonesBlackberryGartnerwirelessNetworkingconsumer electronicsMobile/Wireless

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