Blackberry makes a bold move to try and raise $1 billion in financing

Blackberry shares dropped by 16 percent (to a 10-year low) following news that the company no longer plans on selling itself.

The company abandoned interest in all offers. Instead, it is making a radical move to try and  raise over $1 billion in financing.

Only a few days ago BlackBerry was in the midst of a bidding war between Fairfax Financial and the founders of the company, Doug Fregin and Mike Lazaridis.

Back in September Fairfax Financial made a $4.7-billion bid and BlackBerry gave the firm seven weeks to secure financing.

However, Fairfax Financial had trouble raising the finance it needed to carry out the deal. Instead, Fairfax has stated that it will help inject $250m to the new fund-raising effort.

Barbara Stymiest, chair of Blackberry’s board of directors, said:

“This financing provides an immediate cash injection on terms favourable to Blackberry, enhancing our substantial cash position.”

Mike Genovese, an analyst at MKM Partners, said:

“It shows that their intellectual property is not worth much, it shows that their subscriber and cash flows are unpredictable, so it’s not a good company for private equity to buy.”

Thorsten Heins will step down as chief executive of the company and John Chen will become interim chief executive. Mr. Chen said:

“Blackberry is an iconic brand with enormous potential – but it’s going to take time, discipline and tough decisions to reclaim our success.”

A year of losses and cuts for Blackberry

After giant losses during the second quarter of 2013, which nearly reached one billion dollars ($965 million), the company announced that it would cut 40% of its workforce.

Is there hope for BlackBerry?

BGC Partners analyst Colin Gillis told the BBC:

“Now we’re back to the downward spiral. They’ve got $1bn more cash that buys them time. The drumbeat of negativity is likely to continue.”

National Bank analyst Kris Thompson doesn’t see a bright future either, stating:

“Investors should expect very poor operating results in the coming quarters (as well as) a declining subscriber base, falling shipments, enterprise defections, market share loss, etc.”

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