Shares of BlackBerry Ltd. BB-T jumped Friday after Bloomberg reported that New York private equity firm Veritas Capital is considering a bid for the Canadian company.
The stock closed at US$5.23, up 18.1 per cent on the New York Stock Exchange, after the story was published early Friday, although Bloomberg didn’t identify its source and characterized the state of talks as early. It was the stock’s highest close in almost three months. Nearly 28.5-million shares changed hands on the exchange, the busiest volume in more than nine months. BlackBerry and Veritas did not respond to calls seeking comment.
BlackBerry, which has struggled to regain investor interest since the demise of its smartphone business, announced in May it was exploring a potential breakup of the company. The company hired investment banks Morgan Stanley & Co. and Perella Weinberg Partners as financial advisers for the strategic review, but did not set a timetable for completing the process.
Chief executive officer John Chen said on an earnings call in late June that BlackBerry’s strategic review was still in its early stages, declining further comment. The review’s announcement appeared to be an attempt to appease investors leading up to the company’s late June annual meeting, after British hedge fund Fifthdelta Ltd. accumulated a nearly 10-per-cent stake in BlackBerry.
This is a pivotal year for the company: It sold most of its legacy smartphone-related patents, which had generated hundreds of millions of dollars in high-margin revenue in recent years through licensing deals with other companies. This fall, Mr. Chen comes to the end of his second five-year employment contract and BlackBerry faces repayment of US$365-million of debentures.
Mr. Chen was successful in his first five years, transitioning BlackBerry completely out of the smartphone business, cutting costs and securing its future as a going concern. He was also aided by billions of dollars in legacy high-margin service-fee revenue negotiated by his predecessors with telecom carriers when BlackBerry hand-held devices were in hot demand and which continued to pour in for years.
But BlackBerry’s share price has languished for years, except for a brief spike when it became a “meme stock” during the COVID-19 pandemic. Its shares now trade at roughly the same level as two decades ago, when the device business was still young.
The company is a hodgepodge of different businesses: It provides in-car software to connect vehicles to the internet, it sells cybersecurity software and it provides device management software used by corporations to manage fleets of devices used by their employees.
It is an odd duck with no peers in terms of its mix of businesses. The cybersecurity business is largely a collection of companies purchased over the years. That business has been a disappointment, delivering far less growth than expected. BlackBerry is a leader in the device management business, but it is a crowded, mature niche sector.
BlackBerry’s crown jewel is its connected-car business, managed out of its Ottawa-based QNX unit, which it bought in 2010. The company has said the division should deliver 20-per-cent annual growth for several years, including revenue of US$240-million to US$250-million this year. The technology is in hundreds of millions of cars and used by all 10 of the world’s largest automakers.
Results for the company’s most recent quarter, published in late June, fell below expectations. Cybersecurity revenues in the period, its first fiscal quarter, came in at US$93-million, down 18 per cent year over year, and revenue from its car-software business dropped by 12 per cent to US$45-million, both below expectations.
On a call at the time to discuss earnings, Mr. Chen stated BlackBerry’s strategy “is clear” and based on “a robust operating plan for both our business units to address the large and growing market opportunities.” He said that the company could achieve profitable growth and “generate significant shareholder value” by executing its plan.