Many sources have linked hardware vendor Lenovo to Waterloo, Ont.-based smartphone maker BlackBerry.
Sources say that Lenovo, based in China with a 17 per cent stake held by IBM Corp., agreed to look at BlackBerry’s books after inking a non-disclosure accord.
What makes this deal striking is that Lenovo already has developed its own smartphone and is doing well in its own home market of China. Currently Lenovo sits second behind Samsung in total sales even out-gaining Apple’s iPhone.
CDN recently interviewed three Lenovo senior executives about its smartphone coming to Canada and the U.S. market. All three said there are no plans, no timeline and no consideration for bringing the Lenovo smartphone to the North American market.
The sentiment, however, is that Lenovo does want to, one day, introduce a smartphone to Canada and the U.S. Both Jay Parker, the company’s North American president and Canada’s own Stefan Bockhop told CDN that Lenovo’s smartphone strategy is a global one.
Currently the Android-based smartphone is available in China, Indonesia, India, Russia, Viet Nam and the Philippines. The total population of those six markets make up almost half of the world’s population. Parker said it’s roughly 47 per cent of the world’s population.
Parker said that a large part of the success of the Lenovo smartphone in China is that the company already is the most popular PC brand in the world’s most populous country.
Word on the street is that Lenovo may be interested in pieces of BlackBerry to strengthen is own smartphone products.
Last month following days of rumours, BlackBerry decided to pull the Band-Aid and release its second quarter financial results. It wasn’t pretty. The company warned investors to expect a GAAP net operating loss of between $950 million and $985 million. Of that, $930 million to $960 million is non-cash, pre-tax inventory charge on the write-off of excess smartphone inventory, primarily Z10s.
In addition to the near-billion dollar loss, BlackBerry also made several structural moves, including laying off about 40 per cent of its worldwide workforce. That will mean a workforce reduction of about 4,500 positions, leaving BlackBerry with about 7,000 full-time global employees. It’s part of a goal to reduce operating expenditures by 50 per cent by the beginning of fiscal 2015.
And on the device front, BlackBerry said it will move its future smartphone portfolio from six devices to four: two high-end and two entry-level, two of them all-touch and two of them QWERTY models. The newly launched Z30 will be the high-end device, while the Z10 will be repositioned for the entry-level market. It’s unclear if the Q10 and Q5 will be the respective QWERTY models.
The company also signaled plans to focus on its traditional enterprise strength and abandon attempts to grow in the broader mass consumer market, saying its future portfolio will focus on enterprise and prosumer-centric targeted devices. This was backed-up by a statement from BlackBerry president and CEO Thorsten Heins.
Just days later, BlackBerry announced it had agreed to be acquired by a consortium led by Fairfax Financial Holdings in a $4.7 billion deal that would take the company private. The letter of intent would see a consortium led by Fairfax pay BlackBerry shareholders $9 in cash for each BlackBerry share they hold, a small premium over where shares were trading at the time.
“We believe this transaction will open an exciting new private chapter for BlackBerry, its customers, carriers and employees,” said Fairfax president and CEO Prem Watsa, in a statement. “We can deliver immediate value to shareholders, while we continue the execution of a long-term strategy in a private company with a focus on delivering superior and secure enterprise solutions to BlackBerry customers around the world.”
It’s only a letter of intent; Fairfax still needs to raise funding, could walk away after its due diligence, and competing offers could come forward during the go-shop period. And it appears that more suitors may emerge.
According to a report from The Wall Street Journal, citing sources familiar with the matter, Cerberus Capital Management LP has expressed interest and is looking to sign a confidentiality agreement to gain access to private financial information from BlackBerry. It doesn’t mean Cerberus will launch a rival bid, but it would gain access to information to help it judge the state of the company and decide whether or not to make a bid.
It’s not uncommon for companies, even rivals, to sniff around a company during a go-shop period, and sign a confidentiality agreement to gain access to private financials. During Dell’s go-private process, rivals HP and Lenovo took advantage of the go-shop period to get access to Dell’s books. Its unlikely either had serious designs on bidding for the company; they just wanted a peek under the curtain.
