BlackBerry hires JPMorgan, RBC to help it find a partner

Bloomberg Research In Motion (RIM) investors see an outright sale as the best choice for the BlackBerry maker after a series of failed turnaround efforts led management to explore strategic options.

RIM said this week it hired JPMorgan Chase & Co and RBC Capital Markets to help it find a partner or license its operating system. That won’t be enough to reverse the company’s stock decline and flagging sales, said RIM investor Vic Alboini, chairman of the Toronto-based investment firm Jaguar Financial Corp. He’d rather attract a buyer, such as Microsoft Corp or International Business Machines Corp.

“We would like to see a sale of the company or a breakup, and if a breakup, the sale of each of the parts,” said Alboini, who has urged RIM to sell itself since at least September. “We’re pushing and cajoling RIM to get to the promised land of a sale or breakup.”

RIM, beset by shrinking market share, executive turnover and product delays, tumbled 7.8 per cent on Wednesday, bringing declines in the past year to more than 76 per cent. The company said this week that it will probably report its first quarterly operating loss since 2004, and chief executive officer Thorsten Heins has yet to give a release date for the next generation of BlackBerry phones aimed at reinvigorating sales.

The company’s next steps may include forging partnerships, licensing its software and looking at “strategic business model alternatives,” Waterloo, Ontario-based RIM said. It's also attempting to streamline operations by reducing spending and headcount.

“It’s a business model that’s badly broken, but it’s got assets that are worth something to somebody,” said David Baskin, president of Toronto-based Baskin Financial Services, which manages C$450 million (Dh1.6 billion) in equities. While he doesn't own RIM shares, he’s considering investing in the company because of the takeover prospects. “You don’t hire a banker unless you’re considering a sale,” he said.

Heins, who took over from RIM co-founders Jim Balsillie and Mike Lazaridis in January, hasn’t ruled out a sale of the company, though he said in March he’s not focused on that scenario.

RIM declined to comment beyond reiterating previous statements made by Heins.

Heins’s stance may just be a smoke screen, said Tom Caldwell, CEO of Caldwell Securities Ltd in Toronto.

“The best way to say you’re considering a sale is to say you’re not for sale,” Caldwell said. “I think they're looking for a buyer for the whole thing.”

US companies have plenty of cash to spend, and Microsoft has to be seen as a front-runner to buy the BlackBerry maker, Caldwell said. RIM would give Microsoft a bigger foothold in the smartphone market, where it’s competing against Apple and Google. Microsoft already has a partnership with Nokia Oyj to build devices based on the Windows Phone software.

US private-equity firms also may be attracted to RIM, Caldwell said. A restructured RIM focused on the corporate market might be the kind of business that a buyout firm would be interested in, particularly if RIM has already cut some of its fat, he said.

RIM said last week that it will be making “significant” reductions in spending and staffing as it looks to save $1 billion in operating costs this year.

Nokia, based in Espoo, Finland, also could be a bidder for RIM’s phone business, said Jaguar’s Alboini. Facebook’s another possibility, he said.

IBM and Microsoft are the two most logical acquirers of RIM’s network-services business if the company were broken up, Alboini said. That division operates encrypted e-mail servers and handles other functions for corporate customers.

Representatives of Microsoft, IBM, Nokia and Facebook declined to comment on whether they would consider buying RIM.

BlackBerry 10 release:

Acquirers are unlikely to consider a deal before RIM introduces BlackBerry 10 later this year, Peter Misek, an analyst at Jefferies & Co, said in a report. Facebook is an unlikely buyer, and Microsoft will probably wait to see how its own Windows 8 software fares before acting, he said. Government restrictions also could hamper acquirers outside North America.

At the same time, RIM’s falling valuation has made it an increasingly affordable target. The stock has dropped more than 90 per cent from its mid-2008 high, when RIM's hold on business users was secure and the iPhone had only been on the market for a year.

“You've got a lot of cash, a lot of assets and a lot of patents,” said Don Yacktman, founder of Yacktman Asset Management, RIM’s seventh-largest investor. The firm held about 9.7 million shares of RIM at the end of the first quarter, giving it a stake of about $100 million in the company. “There’s still a lot of value there.”