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The only sure thing is that BlackBerry Ltd. is about to become a much, much smaller company.
Speculation that BlackBerry management is warming to the idea of privatizing the company has the stock almost six per cent higher Friday. Shareholders, predictably, are dreaming of a big premium to parachute them out of a stock that has fallen almost 20 per cent in 2013.
As with Dell Inc. before them, a privatization strategy would represent an admission that the company must be restructured. Public shareholders – myopically focused on quarter over quarter profit growth – are unlikely to stick around as any company jettisons businesses and staff to retool for a new market environment.
One of the most important rules of investing is that "If it's not the company you bought, you have to sell." Meaning, that if the rationale behind an investment no longer exists, it's time to sell the stock and move on. A company undergoing a large scale restructuring is the very definition of this.
Importantly, the Reuters report that broke the story takes great pains to emphasize that no announcements from BlackBerry management are imminent.
But nonetheless, the strategy does seem to make sense with Dell as a precedent. In Dell's case, the company is looking to scale down its reliance on the shrinking personal computer market while trying to gain a larger foothold in mobile computing and cloud networks.
At BlackBerry, the stock's pre-Z10 valuation gives us a clue as to what form restructuring would take. Before the optimism of 2012, the Blackberry stock price valued the company solely as a mobile network provider, like Telus without a land line business. Investors were essentially attributing no value to the handset business, and we appear to be heading back in that direction.
A BlackBerry that emerges from restructuring is likely to focus on corporate network solutions. With a meagre global market share of 2.9 per cent (2013 sales), the once-iconic handset business will probably be sold off, either in whole or partially through a joint venture.
Public or private, there seems little hope that BlackBberry can avoid significant downsizing. The steady stream of executive departures foreshadows the impending withdrawal from unprofitable areas.
There is enough opportunity in the technology space – and enough talent at BlackBerry – to be optimistic that the company can successfully re-tool and change focus for the future. Until that happens, it will form a cautionary tale about the complexities of the technology business.
Scott Barlow is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here to read more of his Insights, and follow Scott on Twitter at @SBarlow_ROB.