BlackBerry investors to turn up the heat on management

TORONTO/NEW YORK Fri Jul 5, 2013 11:41am EDT

1 of 2. The trading symbol for Blackberry is seen on a screen on the floor at the New York Stock Exchange, April 1, 2013.

Credit: Reuters/Brendan McDermid

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TORONTO/NEW YORK (Reuters) - BlackBerry (BBRY.O) will likely face tough questions about its future at its annual meeting on Tuesday after dismal quarterly results last week triggered a 28 percent plunge in the Canadian smartphone maker's share price.

Sales of BlackBerry's make-or-break new line of smartphones in the quarter ended June 1 came in well below analysts' expectations and offered little evidence that the company can quickly win back market share from Apple Inc's (AAPL.O) iPhone, Samsung's (005930.KS) Galaxy devices, and other phones powered by Google Inc's (GOOG.O) Android operating system.

"The results were a quasi death knell for BlackBerry," said John Goldsmith, the deputy head of equities at Montrusco Bolton, which owns more than 1.5 million BlackBerry shares. "The share move last week was very violent. I think you are going to get people standing up and making their voices heard at the AGM."

BlackBerry has forecast another operating loss for the current quarter, but Chief Executive Thorsten Heins said the company is on the right track and just needs more time.

"This is a year of investment. We have managed our cash carefully and prudently, and we now have the funds to invest, so this is the 'create the future' year," Heins told Reuters.

Some investors say BlackBerry must now look at all its options, from a sale of the whole company to a sale of parts. Its valuable patent portfolio and high-margin services business could draw interest from technology companies, according to bankers and investors.

Interest from private equity is seen to be weak, however, and some investors said they fear that BlackBerry will only lose more value if it keeps posting losses, burning through cash and bleeding subscribers.

"I think the pieces were worth more than the whole a year or two ago, but that's becoming less of a convincing argument and I am not sure it is true," said one fund manager, whose firm is one of BlackBerry's top 20 shareholders. The manager declined to be identified, citing to his firm's policy.

Ottawa reviews any big takeover of a Canadian company for competitive and national security reasons. Government officials have often said they want BlackBerry to succeed as a Canadian company, but concede they do not know how things will play out.

Given the uncertainty about its turnaround prospects, a foreign bid for BlackBerry could be palatable to Canadian regulators, some shareholders say.

PROSPECTS THINNING

Heins said BlackBerry is determined to stick to its strategy, and will unveil more devices that run on its new BlackBerry 10 operating system over the next eight months.

"We stay the course. This is the course that management has created and it is course that the board has accepted," he said.

A source close to BlackBerry said the sharp drop in the company's share price could trigger pressure on the board to re-examine its options, in spite of reluctance to do a deal.

"It is the board's job to deal with this objectively, and we hope they would be objective enough to do the best thing for the shareholders," said Don Yacktman of Yacktman Asset Management, another top 20 investor in BlackBerry, with 5.8 million shares, according to Thomson Reuters data.

Many investors say BlackBerry's new devices are impressive, but they fear the company lacks the wherewithal for a drawn-out fight against Apple and Samsung.

BlackBerry also competes against Microsoft Corp (MSFT.O) to be the No. 3 platform in the smartphone market.

"The problem here is they are facing Goliaths like Apple and Samsung, forget about the other Android devices. With a research and development budget that is a fraction of that of those two companies, how on earth can they compete?" Goldsmith said.

"I love fairy tale endings as much as the next person, but this is David versus two Goliaths, so good luck."

(Editing by Janet Guttsman; and Peter Galloway)

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Comments (4)
overseeker79 wrote:
David wouldn’t be scared of an army of Goliaths, because David was BOLD.. :)

Jul 05, 2013 2:11pm EDT  --  Report as abuse
TDPGroup wrote:
IF MANAGEMENT DOES NOT IMMEDIATELY, AS IN RIGHT NOW — TODAY, CUT THE CRAP THEN THE BOARD MUST STEP IN AND DO SO.
BlackBerry has a superior device and technology that nobody knows about and that is being intentionally crippled by two of the largest US cell companies who are not releasing software updates that resolve the known issues and add critical features.
They either kick those firms in the balls, right here and now and in public or they may as well close their offices and go home.
I speak specifically of Verizon, although AT&T is responsible for this as well.
BlackBerry restricts software updates to carrier-endorsed things. Contrast this with Apple, which refuses to allow carriers to “approve” their IOS updates (and thus everyone gets them at once) or Samsung, which has the carriers push OTA updates but makes manual updates available over KIES on a PC if you want them.

But Verizon, in particular, still (as of this morning) shows 10.0.9.xx firmware as “official” for the BlackBerry Z10. This is an outrage — 10.0.9 was outdated on the day of the launch, with T-Mobile and AT&T both shipping 10.0.10. AT&T for its part has refused to release a 10.1.x firmware version — of the major US carriers only T-Mobile has done so.

Why does this matter? Because 10.0.9 was very nearly an engineering prototype version and was (and is) full of bugs. 10.0.10 had problems too, but less-severe ones. 10.1 is stable and contains a number of additional features, including remote file access, but 90% of the US market has no official support or availability for it. The entirety of Canada has it as does nearly all of Europe!

Jul 05, 2013 9:45pm EDT  --  Report as abuse
yummy8755 wrote:
As someone who actually owns a
Q10, the product is fantastic, but there is a learning curve, and the lack of a familiar starting point turns off both iPhone and former Blueberry owners, I am told. Too bad. But that raises a question, why a company would roll the dice that way: didn’t they study reactions in focus groups, pass out the phones and observe the crowd? And yet a huge percent of service complaints in the auto industry comes from design issues with new technology. Misunderstanding about how people want the new thing, but aren’t prepared to work very much to use it?

Jul 06, 2013 2:52am EDT  --  Report as abuse
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