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BlackBerry Buyout Deal Falls Apart; CEO To Step Down

The $4.7 billion buyout deal that would have led to BlackBerry being acquired by its largest shareholder has hit a dead end.

Fairfax Financial Holdings Limited announced in September that it had reached a preliminary agreement with BlackBerry to purchase the device maker in a deal that would have taken BlackBerry private.

However, BlackBerry and Fairfax announced on Wednesday that the deal has fallen through. Instead, Fairfax and undisclosed investors are issuing $1 billion in debt securities that can be converted to stock at $10 per share. BlackBerry's stock plummeted 16 percent on Wednesday in the wake of the news.

BlackBerry also announced that CEO Thorsten Heins would be stepping down. Taking the helm as acting CEO is John Chen, the longtime CEO of Sybase. Chen took over Sybase after the once-large database company fell on hard times, facing competition from Oracle, IBM and onetime partner Microsoft, which it ironically helped get into the database market.

While Sybase was never able to regain the share it lost to those competitors, Chen oversaw the company's expansion into mobile middleware and the development of an in-memory database. Those moves made the company attractive to SAP, which acquired Sybase in 2010 for $5.8 billion, a 40 percent premium to its market cap at the time of the deal.

It remains to be seen whether Chen will eventually become BlackBerry's permanent CEO or if he is merely standing in while the company searches for a new leader. If Chen does have long-term plans for BlackBerry, that might suggest the company is not destined to be sold off in pieces, as many have predicted will happen.

Indeed, Microsoft, Amazon, Google and Ericsson were all "possible buyers" for BlackBerry because they were interested in pieces of the company, an informed source told The Wall Street Journal. Ultimately, however, they all walked away from a deal.

Technology journalist Mary Branscombe noted in September that Microsoft has no need for BlackBerry's hardware or operating system. Because of Skype, the once-popular BlackBerry Messenger (BBM) service would offer little value. Nor would there be value from BlackBerry's enterprise "crown jewel," the BlackBerry Enterprise Server (BES), thanks to mobile device management capabilities in the latest versions of Exchange, System Center and Windows Intune. Given Microsoft's tendency to license patents and not buy them, Branscombe said it's unlikely Microsoft would buy the company for $5 billion just for patents.

About the Author

Jeffrey Schwartz is editor of Redmond magazine and also covers cloud computing for Virtualization Review's Cloud Report. In addition, he writes the Channeling the Cloud column for Redmond Channel Partner. Follow him on Twitter @JeffreySchwartz.

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