BlackBerry stock jumps as company confirms John Chen’s exit as CEO after 10 years

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BlackBerry Ltd. BB-T is looking for a new CEO after announcing the imminent departure of long-time leader John Chen, a move that was welcomed Monday by investors.

The company confirmed the news, originally published online by The Globe and Mail, in a release shortly after markets closed, announcing the 68-year-old Mr. Chen would retire effective this Saturday, 10 years and one day after he joined. Board member Richard Lynch will become interim CEO until the company hires a permanent replacement.

Lead director Prem Watsa said the board was grateful for Mr. Chen’s leadership, stating “his achievement of saving BlackBerry and repositioning it as a software company” has been “remarkable.”

BlackBerry stock jumped after publication of The Globe story late in the trading session, closing up 6 per cent on the day.

Mr. Chen’s fate with the Waterloo, Ont., company has been a source of speculation for months as a five-year extension to his original employment contract was set to expire Nov. 3. Mr. Chen addressed the uncertainty at an investor briefing two weeks ago, saying he didn’t know if he would remain and that the decision about his future had been left until after the board decided earlier in October to split itself in two.

There was also a question of what role, if any, Mr. Chen – who earned a fixed US$3-million in salary and bonus per year – would occupy after the split. Following a strategic review, BlackBerry said it would spin off its profitable fast-growing connected car, or internet-of-things (IOT), business into a separate public company next year, from its slower growing, unprofitable cybersecurity unit.

“It’s now time for me and the board to sit together and say what value I add, or had I ever added any value, or what value I add going forward,” Mr. Chen said at the time. In Monday’s release he said he was proud “to have been able to establish BlackBerry’s vision of a trusted, software-defined world and to position the company to unlock value” by separating its two core units.

John Chen to exit BlackBerry Friday, 10 years after leading turnaround that remains unfinished

Mr. Chen was appointed a decade ago to replace Thorsten Heins, who had taken over in early 2012 from long-time co-CEOs Jim Balsillie and Mike Lazaridis. The Hong Kong-born, California-based Mr. Chen, an electrical engineer by training, had previously led a successful turnaround of database and business services company Sybase Inc. before its sale to SAP AG for US$5.8-billion in 2010.

He faced another daunting challenge at BlackBerry, which popularized the smartphone category and sparked demand for hand-held mobile data communicators starting in 1999 when it was called Research In Motion. But the company stumbled badly attempting to respond to the arrival of Apple’s iPhone in 2007 and the subsequent rapid adoption of Android smartphones, which eschewed the mini-physical keyboard of BlackBerry devices in favour of touch screens.

It took BlackBerry six years to launch a proper competitive response. By then it was too late; hand-held sales kept plummeting. The company had also abandoned an alternative plan championed by Mr. Balsillie to bet on software and services instead of hardware, centred on its BBM mobile instant message service.

Mr. Chen oversaw one last, unsuccessful attempt to revive handset sales before the company exited the smartphone manufacturing business it had once dominated and slashing costs and staff. He said on a recent podcast “the emotion of having the hardware – the phone business – die on my watch was the hardest” decision of his career. BlackBerry no longer supports its device operating systems.

Mr. Chen’s protracted turnaround attempt was aided by billions of dollars in legacy high-margin service-fee revenue negotiated with carriers by his predecessors when Blackberry devices were in demand, and which poured in for years as customers continued using its aging machines. The company on his watch also embarked on a lucrative business of extracting payments from other companies for alleged use of its smartphone-era intellectual property but sold most of those patents this year.

The company’s one-time saviour has otherwise delivered little joy for shareholders, leading to growing discontent among them. Under Mr. Chen, BlackBerry had become a hodgepodge of businesses, mostly picked up through acquisitions before and after he joined. It provides in-car software to connect vehicles to the internet. It sells cybersecurity software and provides device management software used by corporations to manage the fleets of devices used by employees.

The cybersecurity business has been a disappointment, delivering less growth than expected. BlackBerry’s jewel is its connected-car business, managed out of its QNX unit in Ottawa, which was picked up in a 2010 acquisition. It is expected to deliver 20-per-cent annual growth for years, far more than the cybersecurity business.

But the company recently announced disappointing revenues for both divisions and cut its revenue forecast for the connected-car unit owing to delays in project implementation and reorganizations at automakers.

Meanwhile, BlackBerry’s shares have languished for years – except for a brief spike when it became a “meme stock” in 2021 and Mr. Chen sold US$24.8-million worth of performance-based shares, which had only vested because of the craze-fuelled surge.

The stock retreated and now trades at roughly the same level as 24 years ago when its wireless e-mail device was the world’s hottest gadget. It started Monday about 40-per-cent lower than its last closing price before Mr. Chen joined.

Outrage over BlackBerry’s executive pay – including Mr. Chen’s meme-stock-triggered bounty – resulted in two proxy advisers – Institutional Shareholder Services Inc. and Glass Lewis & Co. – recommending a “no” vote on the non-binding “say on pay” resolution at its June, 2022, annual meeting.

Mr. Watsa was barely re-elected, garnering 50.7 per cent support, after Glass Lewis suggested shareholders vote against him and two other directors on the compensation committee, including Mr. Lynch.

Mr. Chen has earned a cumulative US$219.8-million during his tenure up to the Feb. 28 end of BlackBerry’s last fiscal year, dominated by a US$84.8-million restricted share unit award when he was hired and US$106-million of share units in 2019.

Then, British hedge fund Fifthdelta Ltd. bought nearly 10 per cent of BlackBerry stock to become its largest shareholder. Given it has made other investments in the internet-of-things space, it appeared to be interested in BlackBerry’s connected-car business. Some observers have speculated Fifthdelta’s arrival was the catalyst for a strategic review announced in May that led to the spinout plan.

Mr. Chen is also not popular among employees, with an approval rating of just 35 per cent on Glassdoor, a site that tracks worker sentiment about their employers.