The battle for BlackBerry Ltd. is heating up, but skeptical investors are waiting to see if a key deadline on Monday yields real bids for the beleaguered smartphone maker.
BlackBerry co-founders Mike Lazaridis and Doug Fregin are in talks with U.S. buyout firm Cerberus Capital Management LP and semiconductor maker Qualcomm Inc. about combining forces on a takeover bid that would keep BlackBerry whole, a source familiar with the situation said Friday. "They're looking at it from a turnaround perspective rather than a breakup," the source said.
Spokespeople for Cerberus, Qualcomm and Mr. Lazaridis declined comment. In September, Mr. Lazaridis told The Globe and Mail he was hurt by the idea the company could be broken up and sold for parts, which many analysts have suggested could happen.
Mr. Lazaridis and Mr. Fregin own a combined 8 per cent of the stock and are being advised by Wall Street firms Goldman Sachs & Co. and Centerview Partners LLC. "Mike Lazaridis loves his company. He created it. I have to believe they're serious," said Neeraj Monga, an analyst at Veritas Investment Research Corp.
News of the possible partnership came three days before Nov. 4, the date by which Fairfax Financial Holding Ltd. has said it expects to complete due diligence and firm up its conditional $4.7-billion (U.S.) offer for BlackBerry. But the report had little effect on the stock, which closed down in U.S. trading to finish at $7.77, 13.6 per cent lower than Fairfax's bid price of $9. It rose slightly from that level in after-hours trading.
Some analysts have speculated a deal may get done for less than $9 a share. Fairfax, BlackBerry's largest shareholder, has signed only a letter of intent and has not yet disclosed the names of any other partners in what it calls a consortium. It holds nearly 10 per cent of the company but is not proposing to put up new cash. Still, Fairfax CEO Prem Watsa has sounded a confident tone that he will complete the deal. "We've got more than we need," he told The Globe in September.
Qualcomm, which has supplied chips for BlackBerry products, is likely interested in gaining access to BlackBerry's patents and its radio technology.
Mr. Lazaridis and Mr. Fregin have disclosed nothing further about their plans than a securities filing last month in which they said they "are considering all available options" including an acquisition. Should BlackBerry accept a bid from any other bidder than Fairfax, it would have to pay Mr. Watsa's company a break fee.
A financed Fairfax deal is "coming together more slowly than people would have thought," said a source familiar with the situation. "It's very complicated to get your head around what's happening to their business."
BlackBerry faces multiple challenges, including sharply declining sales of its signature devices and increased competition for its business of managing smartphones for large corporate and government customers. BlackBerry recently wrote off close to $1-billion in inventory of unsold phones. It is also in the midst of deeply cutting its work force and costs.
One of the few things going for BlackBerry is the initial success of its BlackBerry Messenger (BBM) instant messaging service for non-BlackBerry devices – which it is giving away for free. It also expects a $500-million tax refund next year.
Along with the two co-founders, others have either signed non-disclosure agreements to look at the company's books or been actively courted by BlackBerry executives. Those range from Germany's SAP AG – which has said it's not interested – and Facebook Inc., which recently hosted a meeting with senior BlackBerry executives, to former Apple CEO John Sculley and Chinese smartphone maker Lenovo Group Ltd.
Some observers believe Microsoft Corp. could also emerge as a last-minute bidder, drawn to BlackBerry's patent portfolio, cash pile and its business serving business and corporate customers, as well as BBM. Microsoft would also benefit by winding down BlackBerry's handset business and gaining access to RIM's QNX software unit, which makes software used in automobiles.
A Microsoft spokeswoman declined to comment. But a senior observer of the global technology sector, who asked not to be identified, said a BlackBerry takeover would be "a low risk [deal for Microsoft] if they've got the bandwidth for it."
"Next week should prove to be very interesting – it will clarify if there are any real investors with fresh cash interested in the company, who believe that there is a profitable business plan."
A BlackBerry spokesman declined to comment on the latest developments.
With a file from reporter Omar El Akkad
(Editor's note: An earlier version of this story said a Qualcomm spokesman had confirmed the company was interested in a joint bid. This version has been corrected to attribute that comment to a source familiar with the situation. A Qualcomm spokesperson declined comment.)