Prem and BBRY?

[Guest Dazel]

 

Cardboard,

 

Hope you know I have great respect for your posts...you have been around this board a long time. We were both right.

No rip and tear...he will pay $9.

I will not touch this without it and do not think anyone else will either...it appears as though Prem was trying to get someone else to bid.

Good luck to all involved.

Next.

 

Dazel.

[giofranchi]

"It is unfortunate for Blackberry shareholders that bought at higher levels and I feel for them...but they got bailed out at $9...how pissed should shareholders be at the management of Blackberry...that is where people's anger should be placed."

 

They should be pissed at the board too and who was on the board since January 2012? Prem Watsa. He was hailed as a hero coming in and he voluntarily offered great praise for the new CEO. If he didn't like what he saw or the direction, then he should have resigned as protest much earlier and tried to salvage the value as he is now. What happened? Was that good for Fairfax shareholders for him to stay on the Blackberry's board for so long and say nothing?

 

So people may say whatever they want. IMO, he does bear some responsibility for where BBRY is at the moment. It is obvious to me that a ton of effort has been put towards the new phones and it has been a major flop. He had to be a supporter until he found out too late that this would not work.

 

Now, I am very happy that he is now putting the reputation of Fairfax at stake in this take-over bid: never dropped the price of a bid and always moved forward. I am still confused as to why the due diligence comment was placed with such emphasis in the take-over release. It is pretty unusual.

 

Cardboard

 

Cardboard,

let me ask you a question: have you ever managed a business of your own?

If you have, you know at least as well as me that most technical aspects are beyond the man at the helm (furthermore, Mr. Watsa hasn’t ever been at the helm of BBRY!). I manage my businesses finding good and reliable technicians, whose work I can barely evaluate and judge... It has always been this way, it has worked pretty well, and it will always be so.

Believe me: Mr. Watsa doesn’t know anything about new phones… And has never pretended otherwise…

He might have made a mistake judging BBRY’s management, but I am not sure... Imo, the error here is much easier and plainer to see: he was tempted to invest in technology, when technology is so hard to predict. Period.

Why did he stay on the board for so long and said nothing? Simply because he didn’t know what to say! I wouldn’t have known what to say, you wouldn’t have known either…

 

giofranchi

 

[bmichaud]

 

Cardboard,

 

Hope you know I have great respect for your posts...you have been around this board a long time. We were both right.

No rip and tear...he will pay $9.

I will not touch this without it and do not think anyone else will either...it appears as though Prem was trying to get someone else to bid.

Good luck to all involved.

Next.

 

Dazel.

 

This post "dazels" me - I don't understand. "He will pay $9" and "I will not touch this without it....". What is the "it"? If the "it" is a guarantee that he'll pay $9, why won't you touch "this"?

 

You and Cardboard were both right - about what? That he'll go through with a $9 bid?

[petec]

Why did he stay on the board for so long and said nothing? Simply because he didn’t know what to say! I wouldn’t have known what to say, you wouldn’t have known either…

 

And/or: he's been saying a lot internally and not having an impact, because he was only one man.  We just don't know and probably won't.

 

+1 to the comment about investing in tech.  I don't really get why FFH love these complex situations so much when there are occasionally 50c dollars lying on the ground in plain sight.  If I have a criticism of them it is that they try to be too clever - which is especially odd since they seem to have learned this lesson when it comes to buying whole insurance businesses, and now focus on quality at reasonable valuations.

[oddballstocks]

"It is unfortunate for Blackberry shareholders that bought at higher levels and I feel for them...but they got bailed out at $9...how pissed should shareholders be at the management of Blackberry...that is where people's anger should be placed."

 

They should be pissed at the board too and who was on the board since January 2012? Prem Watsa. He was hailed as a hero coming in and he voluntarily offered great praise for the new CEO. If he didn't like what he saw or the direction, then he should have resigned as protest much earlier and tried to salvage the value as he is now. What happened? Was that good for Fairfax shareholders for him to stay on the Blackberry's board for so long and say nothing?

 

So people may say whatever they want. IMO, he does bear some responsibility for where BBRY is at the moment. It is obvious to me that a ton of effort has been put towards the new phones and it has been a major flop. He had to be a supporter until he found out too late that this would not work.

 

Now, I am very happy that he is now putting the reputation of Fairfax at stake in this take-over bid: never dropped the price of a bid and always moved forward. I am still confused as to why the due diligence comment was placed with such emphasis in the take-over release. It is pretty unusual.

 

Cardboard

 

Cardboard,

let me ask you a question: have you ever managed a business of your own?

If you have, you know at least as well as me that most technical aspects are beyond the man at the helm (furthermore, Mr. Watsa hasn’t ever been at the helm of BBRY!). I manage my businesses finding good and reliable technicians, whose work I can barely evaluate and judge... It has always been this way, it has worked pretty well, and it will always be so.

Believe me: Mr. Watsa doesn’t know anything about new phones… And has never pretended otherwise…

He might have made a mistake judging BBRY’s management, but I am not sure... Imo, the error here is much easier and plainer to see: he was tempted to invest in technology, when technology is so hard to predict. Period.

Why did he stay on the board for so long and said nothing? Simply because he didn’t know what to say! I wouldn’t have known what to say, you wouldn’t have known either…

 

giofranchi

 

Gio,

 

I appreciate posts like this, you seem to grasp a lot of the real world intangibles of investing, mainly what it takes to run a business.  You have the right approach, the person in charge isn't running the show, they're hiring the talent that runs it and supervising.  A great manager doesn't have to understand the minute technical details, I've found those types of executives maddening, they're always micro-managing.  A great executive sets the vision, assembles the correct team to execute the vision, and then works to eliminate disruptions and hurdles that block the team's progress.

 

I'm a through and through cigar butt investor, it's what I'm comfortable with.  But I also recognize the value of being the best, and having a great business-model.  I'm building a startup myself, we've built the best tools and are hoping to grow by providing a superior product.  So while I'm buying sleepy manufacturing companies on the brink of death in my stock portfolio I'm also working on building a best in class, high margin company that I have control over.

 

The different backgrounds and perspectives of posters adds a lot to this board!

[woodstove]

My take ... sold BB on Monday,, bought more FFH, as expect the value to accrue there.  Bought back BB after drop below 9, so now doubled up.  Believe there is value above 9, as going concern..  FFH should end up with 30 pct of equity in the consortium, cash will cover the debt.  Cash flow will produce nice net profit down the road.  It is decent deal for FFH.  Many good assets, QNX, talent, cust base (biz), etc.

 

Appreciate the civility of this thread.

[petec]

FFH should end up with 30 pct of equity in the consortium

 

Is this a guess or have you done some sneaky maths?  (Either is fine, just wondering!)

[SI]

it surprises me that the stock is below the price at which prem indicated his bid(8.26) with Prem putting his reputation on the line with his 28 year comment. I fully expect Icahn to show if this board doesn't push up the stock first.

 

FD: I have never owned this POS(though been a long FFH owner) before but I bought at Monday's open so I now have a dog in this fight.

[woodstove]

Sneaky maths.  FFH puts in 470m value of current holding, consortium partners put in 1000m, lenders put in 3000m, 200m discrepancy of buyout price of 4700m not discussed  Based on news article.

[petec]

Thanks :)

[SharperDingaan]

We have no dog in this, but a couple of observations .....

 

Everything capitalized on the BS is on the premise of the entity remaining a going concern; if the going concern premise is no longer valid ..... Inventory has to be valued at LCM, patents at the PV of future cashflow, provisions & pensions adjusted for the mass layoff, supplier termination penalties recorded, etc. Whatever is not in tomorrows release, must eventually come out as an adjustment against the $9 offer ....

 

The offer is essentially for just the BB assets, some of which are people. Tech can be licensed & the CF put toward investment payback & the new product development that those people assets excel at. You don't fight the tech gorillas, you make them work for you.

 

Were the game plan rip & tear, FFH would have to have well above 10% of the partnership; & the risk that goes with it. The smarter way is to do what you can to recover your outlays, & reduce your go-forward exposure in both time (yrs) & $. Put the whole thing out of sight, hire a Lazarides to rebuild it, & leave them to it. You don't fight competitors, you partner with them.

 

It promises to be a bumpy ride .... so make your decisions accordingly.

 

SD

 

[Cardboard]

"Cardboard,

let me ask you a question: have you ever managed a business of your own?

If you have, you know at least as well as me that most technical aspects are beyond the man at the helm (furthermore, Mr. Watsa hasn’t ever been at the helm of BBRY!). I manage my businesses finding good and reliable technicians, whose work I can barely evaluate and judge... It has always been this way, it has worked pretty well, and it will always be so.

Believe me: Mr. Watsa doesn’t know anything about new phones… And has never pretended otherwise… "

 

 

FYI, I have had two small businesses and I have worked for quite a few years for a Fortune 100 company. I know very well how is managed the appropriation process at big companies having written many myself.

 

Any time the amount requested for a project exceeded a certain threshold, the appropriation had to be signed off by the CEO and the board. So to say that the CEO in this case and Prem knew little about the phones or a project of that magnitude then I must say that you are very wrong.

 

This was a bet the farm type project. Everyone had to sign off on it all the way to the top. It is actually very important for someone or a group up there to make the final decision about go or no go since there are many functions involved including: sales, marketing, engineering/manufacturing, finances all coming up with their own forecast about cost, sales, etc.

 

This "project" was not an engineering failure. To my knowledge, the phones work fine and manufacturing costs have been in line. It failed because it did not address a "demand" in the marketplace and was likely pushed because of sales and marketing typical rosy forecasts. It is up to top management to figure out if things are realistic and to ask the right questions to their team. It was also top management's job to stop the project or steer it in a different direction if they found flaws during the execution.

 

Blackberry was about a keypad and secure e-mail in the mind of most. What did management expect coming up with a phone that looked very similar to the IPhone but, released 2 or 3 years later? So if there was no device that they could come up with using their strengths or differentiation points, then what was the point of sinking billions of dollars into this adventure?

 

So for those who hate the micro-managing part, I do believe that for companies such as Blackberry and Apple who rely on just a few devices to ensure their survival that for the CEO to understand its product inside and out is crucial. He does not have to know the software code, but at least be able to question his team about the benefit of such and such for their consumers.

 

Cardboard

[matts]

"It is unfortunate for Blackberry shareholders that bought at higher levels and I feel for them...but they got bailed out at $9...how pissed should shareholders be at the management of Blackberry...that is where people's anger should be placed."

 

They should be pissed at the board too and who was on the board since January 2012? Prem Watsa. He was hailed as a hero coming in and he voluntarily offered great praise for the new CEO. If he didn't like what he saw or the direction, then he should have resigned as protest much earlier and tried to salvage the value as he is now. What happened? Was that good for Fairfax shareholders for him to stay on the Blackberry's board for so long and say nothing?

 

So people may say whatever they want. IMO, he does bear some responsibility for where BBRY is at the moment. It is obvious to me that a ton of effort has been put towards the new phones and it has been a major flop. He had to be a supporter until he found out too late that this would not work.

 

Now, I am very happy that he is now putting the reputation of Fairfax at stake in this take-over bid: never dropped the price of a bid and always moved forward. I am still confused as to why the due diligence comment was placed with such emphasis in the take-over release. It is pretty unusual.

 

Cardboard

 

Cardboard,

let me ask you a question: have you ever managed a business of your own?

If you have, you know at least as well as me that most technical aspects are beyond the man at the helm (furthermore, Mr. Watsa hasn’t ever been at the helm of BBRY!). I manage my businesses finding good and reliable technicians, whose work I can barely evaluate and judge... It has always been this way, it has worked pretty well, and it will always be so.

Believe me: Mr. Watsa doesn’t know anything about new phones… And has never pretended otherwise…

He might have made a mistake judging BBRY’s management, but I am not sure... Imo, the error here is much easier and plainer to see: he was tempted to invest in technology, when technology is so hard to predict. Period.

Why did he stay on the board for so long and said nothing? Simply because he didn’t know what to say! I wouldn’t have known what to say, you wouldn’t have known either…

 

giofranchi

 

You don't have a reputation of being the Oracle of Canada, I think that is Cardboard's point. If Prem doesn't have better understanding into BBRY than you, then I don't want him doing this deal (no offense to you of course). We should at least try to consider the deal on it's own terms and merit, and not be so colored that it is Prem. If you change the name Prem to Matts in the media, this deal looks A LOT less prudent from a business/operational perspective, we all know Prem has the skills from a financial perspective. That's my point at least.

[wisdom]

Cardboard

 

Prem has never been the CEO of BBRY. He is CEO of FFH and was on the board of directors for BBRY.

 

He did not sign off on the projects and I do not believe his understanding of technology involved is good enough to be the running BBRY.

 

They will have other people with the technical expertise running the company.

[Viking]

I am amazed at how fast smartphone companies have blown up: Palm, Mororola, Nokia, RIMM... soon HTC? They have not been able to stay popular with consumers. RIM was not able to make the transition from enterprise to consumer. I am sure the decisions made in the boardroom were backed up with great analysis and made perfect sense at the time. Who in their right mind would have been able to predict how fast the company has lost sales.

 

Apple has been able to stay very popular with consumers. Samsung has as well; what's interesting is Samsung made their business by basically copying Apple's phone (very smart). Perhaps RIM's fatal decision, made years ago, was to dismiss Apple's iphone as a strong competitor and not offer a similar product.

 

Samsung's 'dog with fleas' launch of Galaxy Gear shows how few companies are able to launch great consumer products in new categories. Microsoft's Surface is another good example of how challenging it is.

 

Perhaps Apple is grossly underappreciated for how well it develops and manufactures products for the consumer market. Perhaps Apple has the culture and talent to keep innovating; and perhaps their competitors simply do not. Time will tell.

[giofranchi]

Gio,

 

I appreciate posts like this, you seem to grasp a lot of the real world intangibles of investing, mainly what it takes to run a business.  You have the right approach, the person in charge isn't running the show, they're hiring the talent that runs it and supervising.  A great manager doesn't have to understand the minute technical details, I've found those types of executives maddening, they're always micro-managing.  A great executive sets the vision, assembles the correct team to execute the vision, and then works to eliminate disruptions and hurdles that block the team's progress.

 

I'm a through and through cigar butt investor, it's what I'm comfortable with.  But I also recognize the value of being the best, and having a great business-model.  I'm building a startup myself, we've built the best tools and are hoping to grow by providing a superior product.  So while I'm buying sleepy manufacturing companies on the brink of death in my stock portfolio I'm also working on building a best in class, high margin company that I have control over.

 

The different backgrounds and perspectives of posters adds a lot to this board!

 

Hi oddballstocks,

please, let me know as soon as you take your new company public: it is going to be the very first IPO I will gladly buy into! ;)

Usually, I look for stable businesses, which change very slowly or better not at all, led by the shrewdest and most opportunistic strategic minds out there. But, if I could find a company with the “best tools”, that provides a “superior product”, which is "best in class" and "high margin", and which is also led by a very good capital allocator... then, oh well!, I am sure I will not only make a killing… it is going to be a true slaughter!! ;D ;D

 

Cheers!

 

giofranchi

 

[cogitator99]

If we truly believe that Prem will move forward with the bid @ $9, should we be buying BBRY @ $8 for the arb?

 

It seems to me that Prem would not have done this unless he had though things through, which includes the possibility that outside funding would be hard to raise?

 

It's a mind-read but I would think that you'd announce something like this only if you had already lined up the potential investors. 

 

What would the downside be if the bid falls through? Any SWAGSs (scientific-sounding wild-ass guesses)? 

[giofranchi]

"Cardboard,

let me ask you a question: have you ever managed a business of your own?

If you have, you know at least as well as me that most technical aspects are beyond the man at the helm (furthermore, Mr. Watsa hasn’t ever been at the helm of BBRY!). I manage my businesses finding good and reliable technicians, whose work I can barely evaluate and judge... It has always been this way, it has worked pretty well, and it will always be so.

Believe me: Mr. Watsa doesn’t know anything about new phones… And has never pretended otherwise… "

 

 

FYI, I have had two small businesses and I have worked for quite a few years for a Fortune 100 company. I know very well how is managed the appropriation process at big companies having written many myself.

 

Any time the amount requested for a project exceeded a certain threshold, the appropriation had to be signed off by the CEO and the board. So to say that the CEO in this case and Prem knew little about the phones or a project of that magnitude then I must say that you are very wrong.

 

This was a bet the farm type project. Everyone had to sign off on it all the way to the top. It is actually very important for someone or a group up there to make the final decision about go or no go since there are many functions involved including: sales, marketing, engineering/manufacturing, finances all coming up with their own forecast about cost, sales, etc.

 

This "project" was not an engineering failure. To my knowledge, the phones work fine and manufacturing costs have been in line. It failed because it did not address a "demand" in the marketplace and was likely pushed because of sales and marketing typical rosy forecasts. It is up to top management to figure out if things are realistic and to ask the right questions to their team. It was also top management's job to stop the project or steer it in a different direction if they found flaws during the execution.

 

Blackberry was about a keypad and secure e-mail in the mind of most. What did management expect coming up with a phone that looked very similar to the IPhone but, released 2 or 3 years later? So if there was no device that they could come up with using their strengths or differentiation points, then what was the point of sinking billions of dollars into this adventure?

 

So for those who hate the micro-managing part, I do believe that for companies such as Blackberry and Apple who rely on just a few devices to ensure their survival that for the CEO to understand its product inside and out is crucial. He does not have to know the software code, but at least be able to question his team about the benefit of such and such for their consumers.

 

Cardboard

 

In my opinion your whole answer just proves how difficult it is to invest in technology and, I would add, in fashion too.

You write:

Any time the amount requested for a project exceeded a certain threshold, the appropriation had to be signed off by the CEO and the board.

Sure! But the problem remains the same, if even the CEO or the board cannot predict the outcome accurately enough! And that is just the nature of the beast with technology and fashion.

You also write:

What did management expect coming up with a phone that looked very similar to the IPhone but, released 2 or 3 years later? So if there was no device that they could come up with using their strengths or differentiation points, then what was the point of sinking billions of dollars into this adventure?

Those are good questions… in hindsight! What was BBRY to do instead? The only thing I can think of is to become a BRK: to buy new and completely different businesses, using the cash generated by operations that were going to die… Come on! Let’s face it: BBRY is (or was…) in the business of selling mobile phones, either you succeed or you don’t. If you want to run the risk, you do whatever it takes to come up with the best product you can. Vice versa, if you don’t want to run the risk, you use all the cash you generate, until you can generate some, to change business. Could have Mr. Watsa taken the decisions required to follow the second course? I don’t think so.

And despite the existence of a wonderful device like the i-phone, it seems that Samsung is doing pretty well, isn’t it? Therefore, to compete with Apple might not be easy, but neither it is utterly impossible. Or so it seems.

 

giofranchi

 

[alertmeipp]

"Cardboard,

let me ask you a question: have you ever managed a business of your own?

If you have, you know at least as well as me that most technical aspects are beyond the man at the helm (furthermore, Mr. Watsa hasn’t ever been at the helm of BBRY!). I manage my businesses finding good and reliable technicians, whose work I can barely evaluate and judge... It has always been this way, it has worked pretty well, and it will always be so.

Believe me: Mr. Watsa doesn’t know anything about new phones… And has never pretended otherwise… "

 

 

FYI, I have had two small businesses and I have worked for quite a few years for a Fortune 100 company. I know very well how is managed the appropriation process at big companies having written many myself.

 

Any time the amount requested for a project exceeded a certain threshold, the appropriation had to be signed off by the CEO and the board. So to say that the CEO in this case and Prem knew little about the phones or a project of that magnitude then I must say that you are very wrong.

 

This was a bet the farm type project. Everyone had to sign off on it all the way to the top. It is actually very important for someone or a group up there to make the final decision about go or no go since there are many functions involved including: sales, marketing, engineering/manufacturing, finances all coming up with their own forecast about cost, sales, etc.

 

This "project" was not an engineering failure. To my knowledge, the phones work fine and manufacturing costs have been in line. It failed because it did not address a "demand" in the marketplace and was likely pushed because of sales and marketing typical rosy forecasts. It is up to top management to figure out if things are realistic and to ask the right questions to their team. It was also top management's job to stop the project or steer it in a different direction if they found flaws during the execution.

 

Blackberry was about a keypad and secure e-mail in the mind of most. What did management expect coming up with a phone that looked very similar to the IPhone but, released 2 or 3 years later? So if there was no device that they could come up with using their strengths or differentiation points, then what was the point of sinking billions of dollars into this adventure?

 

So for those who hate the micro-managing part, I do believe that for companies such as Blackberry and Apple who rely on just a few devices to ensure their survival that for the CEO to understand its product inside and out is crucial. He does not have to know the software code, but at least be able to question his team about the benefit of such and such for their consumers.

 

Cardboard

 

In my opinion your whole answer just proves how difficult it is to invest in technology and, I would add, in fashion too.

You write:

Any time the amount requested for a project exceeded a certain threshold, the appropriation had to be signed off by the CEO and the board.

Sure! But the problem remains the same, if even the CEO or the board cannot predict the outcome accurately enough! And that is just the nature of the beast with technology and fashion.

You also write:

What did management expect coming up with a phone that looked very similar to the IPhone but, released 2 or 3 years later? So if there was no device that they could come up with using their strengths or differentiation points, then what was the point of sinking billions of dollars into this adventure?

Those are good questions… in hindsight! What was BBRY to do instead? The only thing I can think of is to become a BRK: to buy new and completely different businesses, using the free cash generated by operations that were going to die… Come on! Let’s face it: BBRY is (or was…) in the business of selling mobile phones, either you succeed or you don’t. If you want to run the risk, you do whatever it takes to come up with the best product you can. Vice versa, if you don’t want to run the risk, you use all the cash you generate, until you can generate some, to change business. Could have Mr. Watsa taken the decisions required to follow the second course? I don’t think so.

And despite the existence of a wonderful device like the i-phone, it seems that Samsung is doing pretty well, isn’t it? Therefore, to compete with Apple might not be easy, but neither it is utterly impossible. Or so it seems.

 

giofranchi

 

To be fair, when BB10 was released, the market actually think it had a fighting chance.

[alertmeipp]

If we truly believe that Prem will move forward with the bid @ $9, should we be buying BBRY @ $8 for the arb?

 

It seems to me that Prem would not have done this unless he had though things through, which includes the possibility that outside funding would be hard to raise?

 

It's a mind-read but I would think that you'd announce something like this only if you had already lined up the potential investors. 

 

What would the downside be if the bid falls through? Any SWAGSs (scientific-sounding wild-ass guesses)?

 

At 8 bucks, I think it's a good arb opp on both Prem being able to and willing to put the deal together and potential another bidder coming in.

[onyx1]

http://www.theglobeandmail.com/report-on-business/watsa-insists-fairfax-has-strong-backing-for-blackberry-buyout/article14559903/

 

"The CEO of Fairfax Financial Holdings Ltd. says his company has plenty of potential partners – so many that he believes the equity part of the $4.7-billion (U.S.) offer will be oversubscribed."

 

If it were someone other than Prem, I'd suspect this as a desperate attempt to gather momentum.  But Prem is a man of his word and has an unmatched reputation for credibility and fair dealings.  I put a lot of faith in his public declarations, and my money is on him.

[cpan]

"Cardboard,

let me ask you a question: have you ever managed a business of your own?

If you have, you know at least as well as me that most technical aspects are beyond the man at the helm (furthermore, Mr. Watsa hasn’t ever been at the helm of BBRY!). I manage my businesses finding good and reliable technicians, whose work I can barely evaluate and judge... It has always been this way, it has worked pretty well, and it will always be so.

Believe me: Mr. Watsa doesn’t know anything about new phones… And has never pretended otherwise… "

 

 

FYI, I have had two small businesses and I have worked for quite a few years for a Fortune 100 company. I know very well how is managed the appropriation process at big companies having written many myself.

 

Any time the amount requested for a project exceeded a certain threshold, the appropriation had to be signed off by the CEO and the board. So to say that the CEO in this case and Prem knew little about the phones or a project of that magnitude then I must say that you are very wrong.

 

This was a bet the farm type project. Everyone had to sign off on it all the way to the top. It is actually very important for someone or a group up there to make the final decision about go or no go since there are many functions involved including: sales, marketing, engineering/manufacturing, finances all coming up with their own forecast about cost, sales, etc.

 

This "project" was not an engineering failure. To my knowledge, the phones work fine and manufacturing costs have been in line. It failed because it did not address a "demand" in the marketplace and was likely pushed because of sales and marketing typical rosy forecasts. It is up to top management to figure out if things are realistic and to ask the right questions to their team. It was also top management's job to stop the project or steer it in a different direction if they found flaws during the execution.

 

Blackberry was about a keypad and secure e-mail in the mind of most. What did management expect coming up with a phone that looked very similar to the IPhone but, released 2 or 3 years later? So if there was no device that they could come up with using their strengths or differentiation points, then what was the point of sinking billions of dollars into this adventure?

 

So for those who hate the micro-managing part, I do believe that for companies such as Blackberry and Apple who rely on just a few devices to ensure their survival that for the CEO to understand its product inside and out is crucial. He does not have to know the software code, but at least be able to question his team about the benefit of such and such for their consumers.

 

Cardboard

 

In my opinion your whole answer just proves how difficult it is to invest in technology and, I would add, in fashion too.

You write:

Any time the amount requested for a project exceeded a certain threshold, the appropriation had to be signed off by the CEO and the board.

Sure! But the problem remains the same, if even the CEO or the board cannot predict the outcome accurately enough! And that is just the nature of the beast with technology and fashion.

You also write:

What did management expect coming up with a phone that looked very similar to the IPhone but, released 2 or 3 years later? So if there was no device that they could come up with using their strengths or differentiation points, then what was the point of sinking billions of dollars into this adventure?

Those are good questions… in hindsight! What was BBRY to do instead? The only thing I can think of is to become a BRK: to buy new and completely different businesses, using the free cash generated by operations that were going to die… Come on! Let’s face it: BBRY is (or was…) in the business of selling mobile phones, either you succeed or you don’t. If you want to run the risk, you do whatever it takes to come up with the best product you can. Vice versa, if you don’t want to run the risk, you use all the cash you generate, until you can generate some, to change business. Could have Mr. Watsa taken the decisions required to follow the second course? I don’t think so.

And despite the existence of a wonderful device like the i-phone, it seems that Samsung is doing pretty well, isn’t it? Therefore, to compete with Apple might not be easy, but neither it is utterly impossible. Or so it seems.

 

giofranchi

 

One thing BBY could have done was become an to other phones by offering a keyboard attachments that also have hardware encryption to provide secure messaging access to enterprise BB servers.  This would have solidified their enterprise hold. 

[rjstc]

The thought keeps popping up in my mind of what Buffett said once. Something like when a mediocre business meets good managers (Investors?). The mediocre business usually wins in maintaining its reputation to the detriment of the managers (investors?). Kind of like JCP vs Ackman. BBRY vs Prem to be determined.

[cogitator99]

 

At 8 bucks, I think it's a good arb opp on both Prem being able to and willing to put the deal together and potential another bidder coming in.

 

Thanks for your input alert ;)

[cogitator99]

From Bloomberg. Apologies for the formatting, have no idea how to do some kind of word wrap here.

 

***

 

Sept. 30 (Bloomberg) -- BlackBerry Ltd. was so desperate to

find a buyer that it agreed to pay its biggest shareholder a

rare breakup fee for a tentative takeover offer -- a move that

could deter rival bidders.

 

    The struggling smartphone maker last week said a group led

by Fairfax Financial Holdings Ltd., a Toronto-based insurance

company, signed a letter of intent for a $4.7 billion buyout.

While Fairfax Chief Executive Officer Prem Watsa hasn’t yet

identified the rest of the buyout group or obtained committed

financing, BlackBerry agreed to pay the group a $157 million fee

if it strikes a better deal with another buyer.

 

    BlackBerry’s willingness to agree to a fee without signing

a definitive agreement is “unheard of” and may have a chilling

effect on its auction, according to Tor Braham, the former head

of technology investment banking at Deutsche Bank AG. If a

higher bid comes along, Watsa -- a BlackBerry board member until

last month -- gets the termination fee plus he can cash out on

an almost 10 percent holding.

 

    “It’s a desperate situation,” Willy Shih, a professor of

management practice at Harvard Business School and former

executive at Eastman Kodak Co., said in a phone interview. “The

terms of the deal recognize their difficult situation. Fairfax

is pretty shrewd.”

 

    This is a “beautiful” deal for Watsa, Shih said.

 

    BlackBerry spokesman Adam Emery declined to comment on how

the termination fee structure affects the auction. Paul Rivett,

president of Fairfax, didn’t respond to e-mails or phone calls

seeking comment on the deal terms.

 

                          Breakup Fee

 

    Should it back out of the tentative agreement, BlackBerry

will owe Fairfax a fee of 30 cents a share, or about $157

million, the Waterloo, Ontario-based company said in a Sept. 23

statement. The agreement doesn’t say that Fairfax, whose offer

is still subject to due diligence and negotiation, owes

BlackBerry anything if its proposal isn’t consummated.

BlackBerry won’t owe a fee if the consortium lowers its bid

below $9 a share without board approval.

 

    The breakup fee rises to 50 cents a share, or about $262

million, if the smartphone maker and Fairfax sign a definitive

transaction. That higher fee is about 5.6 percent of the deal

value, above the average termination fee of 3.5 percent for

U.S.-based targets in 2012, according to a June report by

investment banking firm Houlihan Lokey.

 

    “It’s highly unusual that a seller gives a breakup fee to

a buyer with no committed financing,” Morton Pierce, a New

York-based partner in the mergers and acquisitions group of law

firm White & Case LLP, said in a phone interview. “You don’t do

that if you have options.”

 

                    Disappointing Earnings

 

    BlackBerry is eliminating a third of its staff and

refocusing on only business customers after quarterly revenue

missed analysts’ estimates by half. Sales in the Americas fell

faster than anywhere else, tumbling 56 percent to $610 million

for the three months through August.

 

    Investors remain skeptical about a better deal, with the

stock closing last week about 11 percent below Fairfax’s offer

of $9 a share.

 

    The fee “very well could be enough money to deter a

private-equity fund from jumping in,” Braham said by e-mail. A

leveraged buyout firm “would inherently be tight for capital,

and having to borrow an extra $150 million to go to Fairfax

could make someone say, ‘Life is too short.’”

 

                          No Confidence

 

    Bankers had been canvassing potential buyers in search of a

deal for almost a year, two people with knowledge of the matter

told Bloomberg News in August. JPMorgan Chase & Co. and RBC

Capital Markets quietly contacted possible bidders and found

little interest in the whole company, especially among private-

equity firms, said the people, who asked not to be named because

the talks were private.

 

    Silver Lake Management LLC, which is taking struggling

personal-computer maker Dell Inc. private for $24.9 billion with

founder Michael Dell, said it looked at taking a stake in

BlackBerry and decided against it.

 

    “We don’t have enough confidence to underwrite what the

business plan will look like,” Michael Bingle, a managing

partner at the private-equity firm, said Sept. 27 at a

conference in New York. “When you don’t have that confidence,

it’s tough to really pursue this opportunity.”

 

    Two of Canada’s largest pension funds, the Ontario

Teachers’ Pension Plan and the Alberta Investment Management

Corp., held preliminary discussions with Fairfax about its bid

for BlackBerry, two people familiar with the talks said. The

funds aren’t interested in backing a bid for the whole company

and haven’t joined the bidding consortium yet, the people said

last week.

 

                          ‘Free Look’

 

    While the termination fee isn’t necessarily a “deal

killer” for potential rival bidders, it’s more likely to help

Fairfax find firms to join its consortium, said Colin Gillis, an

analyst at BGC Partners LP in New York.

 

    “Fairfax gets a free look and can walk away with no

penalty until Nov. 4th,” Gillis said in a research note last

week. “The risk of a bidding war breaking out for BlackBerry is

low, particularly given what we view are favorable terms to

Fairfax.”