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Urgent challenges await BlackBerry’s incoming CEO Chen

John Chen, incoming CEO of BlackBerry Ltd., is shown in a May 18, 2009 file photo.


Incoming BlackBerry Ltd. interim chief executive John Chen faces a multitude of challenges in trying to revive the company, and little time to pull it off.

Mr. Chen, a seasoned turnaround executive, is taking over as BlackBerry's executive chairman and interim CEO at an extremely difficult juncture. With no strategic buyers on board and deteriorating finances ahead of him, industry watchers said Mr. Chen can't waste a second as he tries to orchestrate the turnaround that never materialized under previous CEO Thorsten Heins.

BlackBerry's phones simply aren't selling. And the company has begun to burn through cash – $500-million in the last quarter alone – as it lays off thousands of employees. He must act fast to reassure key customers that BlackBerry isn't dying as he cuts costs and reevaluates fundamental aspects of the company's business model, according to wireless industry executives and analysts.

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Canaccord Genuity analyst Mike Walkley said Mr. Chen comes in with "the same low probability of being able to turn around the company" as Mr. Heins, and BlackBerry now faces the possibility of even more writedowns. Previously, the company wrote off nearly $1-billion because its all-touchscreen Z10 phone wasn't selling, but Mr. Walkley said the company may face writedowns of a similar size on the company's Q10 phone, which has a keyboard.

"I think there will be another set of writedowns," Mr. Walkley said. Mr. Chen "comes in at a very difficult time. I was a strong believer that with this [sale] process going on, that they would have sold the company on Monday, really at any price. Because I thought the best chance to recharge the company – restructure it, come out with a new business model – was to go private and get out of the public eye."

Fairfax Financial Holdings Ltd.'s bid to take the company private failed to materialize, and BlackBerry instead agreed to raise $1-billion (U.S.) from the sale of convertible debt to Fairfax and other investors. Remaining a public company means BlackBerry must continue to grapple with the pressure of showing results quickly.

"He's not going to get any slack at all," one former BlackBerry executive said of Mr. Chen.

Mr. Chen, with Fairfax chief executive Prem Watsa as a lead director, will quickly need to reassess the decisions and appointments made during Mr. Heins's tenure as CEO, while being ruthlessly efficient about which geographic markets BlackBerry concentrates on, said the executive, who is familiar with BlackBerry's top management.

Mr. Heins, who took over the company in January, 2012, at least had something to look forward to: The company's new BlackBerry 10 phones were still being built and investors still hoped for future success – or at least a takeover bid.

But with that possibility ended, at least in the near term, Mr. Chen is left to deal with the financial fallout from the failed bet on hardware, even as BlackBerry faces fierce competition on the software and services side of the business in the mobile device management industry.

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The new management team will also have to deal quickly with the company's uncompetitive BlackBerry 10 product lineup. "The software interface needs a serious upgrade," the former BlackBerry executive said.

With two large industry conventions coming up – the Consumer Electronics Show in January and Mobile World Congress in February – the wireless world is likely to see a flood of sleek new Android devices from Samsung Electronics Co. Ltd. and other global handset giants.

But while BlackBerry used to see explosive growth in emerging markets, rivals have hammered its international market share. BlackBerrys accounted for nearly 20 per cent of all smartphones sold around the world during the fourth quarter of 2008, according to research firm Gartner, but that fell to just 2.7 per cent in the second quarter of 2013.

Ken Campbell, chief executive at Tunisian wireless carrier Tunisiana, said consumers in the North African country are opting for cheap Android phones, while business users are now asking for devices from Samsung Electronics Co. Ltd. or Apple Inc. He said BlackBerrys now account for less than 2.5 per cent of his sales.

"Blackberry is falling fast in emerging markets," said Mr. Campbell, who was once CEO at Canada's Wind Mobile. "Unless they have some killer product in the pipeline, I am wondering how they are going to turn this thing around."

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