Many companies go public to decrease debt or to obtain financing externally, instead of using the banking system. A company has many other reasons to want to go public instead of staying private, like public credibility, the ability to offer stock and stock options to attract top talent, and the ability to offer securities instead of 100% capital for acquisitions of other companies. BlackBerry (NASDAQ: BBRY) is thinking of going private because it cannot keep up with competitors like Apple (NASDAQ: AAPL) and Samsung (NASDAQOTH: SSNLF), among other issues.
Private companies have 100% authority over its operational choices and it does not have to worry about shareholder interference and expectations. As an owner of a privately held company, you cannot have your company sold out from under you. Disclosures about a private company’s operations are not called for with private companies, these are just a few private company benefits. BlackBerry has many issues, but could going private help it solve its problems?
A little breathing room might not be enough, but the CEO and the Board of Directors are in private conversation on going private. This breathing room can give BlackBerry a chance to survive and fix issues it has.
January 2012, BlackBerry spoke with Silver Lake a private-equity firm, about the possibility of going private. The conversation fell through because the companies could not agree on the valuation of BlackBerry. A period of breathing room could give the company more time to have talks with Silver Lake and other companies. Enterprise computing has been the primary discussion between Silver Lake and BlackBerry as of lately.
Enterprise computing is a computing model where many users have a passage to data and applications saved on a single server.
This period of breathing room can give BlackBerry enough time to sale some of its patents or expand its BlackBerry 10 OS. The company could finally find a way to structure a deal, which at this point has been a dead end. BlackBerry has high-margin services business and a high value patent portfolio that could draw attention from other tech companies. This breathing room will allow BlackBerry to proceed as usual, without explaining or telling shareholders how the company is running its operations or what deals are on the table.
Losing on all fronts
BlackBerry’s new smartphone has not lived up to what BlackBerry thought or hoped it would. Sales have failed to meet expectations and the stock has dropped dramatically by more than 20% this year alone. Its market cap has fallen to $4.95 billion from its high in 2008 of around $84 billion, while Apple has seen 0.9% growth in its OEM market share, looking at comScore’s stats chart.
LG, Motorola, and HTC have lost market share, thus helping Apple and Samsung gain more market share. As you can see, Samsung is up 2% taking majority of the lost market share.
Apple may be in the lead when it comes to all OEMs, but when it comes to operating systems, Apple is in second when compared to Google‘s Android, but grasping majority of the lost market share from BlackBerry and Symbian.
The Z10 smartphone’s price was reduced to $49.99 amid comatose sales. Upon its debut in March in the U.S., the smartphone went on sale for $199. I hope it costs less to build the device than what the device is selling for now. Apple sells one million tablets in at least a week and Blackberry’s Playbook has finally reached over one million customers, which is terrible.
Units of the Galaxy S4 have not sold, as the company would have liked, but the company still has more market share than BlackBerry. Samsung has been going under an inventory correction because its devices are not moving as fast as usual. Samsung usually tries to flood consumers with multiple devices, while Apple only puts out one or two devices a year in every segment it has.
BlackBerry may need to consider licensing its software to other tech giants like Samsung or whoever. Apple and Samsung can grab whatever sales the BB10 devices have, if nothing comes out of Blackberry going private. With its sales, market cap, and revenue dwindling away, coming up with ways to generate new revenue should be an option.
Aug. 8, 2013, BlackBerry reported that the U.S. Defense Information System Agency gave it thumbs up on its first two BB10 mobile devices to be used on Department of Defense networks, affirming that the BB10 devices has all required security measures set in place. This is a win-win for BlackBerry, although it seems late in the game, but it is never too late to try.
Apple and Samsung would be at least 25% of the reason for the fall of BlackBerry, if it were to fail. BlackBerry and its lack of focus on what consumers want is a major flaw in its problems. I watched a movie called “Margin Call” and the CEO said, “It sure is a lot easier to be first.” BlackBerry was last in every aspect of smartphone innovation and tablets; maybe the breathing period is necessary for restructuring the way the company looks at things. BlackBerry has not yet decided if its going private or not, but it is something to watch going forw