Qualcomm and Cerberus Join a Bid for BlackBerry

Qualcomm and Cerberus Join a Bid for BlackBerry

Updated, 7:36 p.m. | BlackBerry may be on its last legs, but the company still has multiple suitors.

A consortium that includes the wireless company Qualcomm, the private equity firm Cerberus Capital Management and BlackBerry’s co-founders, Mike Lazaridis and Doug Fregin, is preparing a bid for the company ahead of a Monday deadline, according to people briefed on the process.

Details of the bid, which was first reported by The Wall Street Journal, were not clear. And the offer could still fall apart, the people said.

But the consortium had the makings of a serious bid that could set it apart in what has become a messy auction process.

In Qualcomm, the group has wireless experience and a large corporate entity that could backstop BlackBerry’s losses. Cerberus brings cash, and Mr. Lazaridis and Mr. Fregin, who own about 8 percent of the company’s equity, would ease the group’s path to control.

BlackBerry, once the leader in smartphones, has been overtaken by Apple’s iPhone, and by many devices using Google’s Android operating system. The depths of its troubles became clear in recent weeks, as the company reported a quarterly loss of nearly $ 1 billion and a steep decline in revenue.

Should the group submit a bid on Monday, its only competition at this point would be a highly conditional $ 9-a-share bid from Fairfax Financial Holdings, a Canadian insurance and investment company. That bid would value BlackBerry, which is hemorrhaging cash, stuck with unsold inventory and apparently directionless, at $ 4.7 billion.

The offer from Fairfax, which owns about 10 percent of BlackBerry, was made in September as the company’s stock price was in a free fall. It was unclear on Friday if Fairfax would be able to arrange financing to propose a formal bid before a deadline of Monday afternoon.

BlackBerry closed down on Friday at $ 7.77 a share but rose slightly in after-hours trading.

Other groups, including the computer maker Lenovo of China, have reportedly considered making bids for BlackBerry. But so far, few appear to have the appetite to take over the company.

If the Qualcomm consortium does make an offer over the weekend, BlackBerry may announce its receipt of a proposal Monday morning. At that point, the company could extend the deadline for final bids, or announce its choice of a bid as late as Tuesday morning.

If BlackBerry accepts an offer before the Fairfax proposal expires on Monday, it will owe Fairfax about $ 157 million. It is highly unusual to see a break fee included in such conditional agreements, but BlackBerry appeared willing to accept such terms to arrest its decline in stock price.

Any ownership group including Mr. Lazaridis would be unlikely to pull BlackBerry out of the business of making phones to concentrate on software and providing high security, wireless network services.

In their final months as co-chairmen and co-chief executives, Mr. Lazaridis and Jim Balsillie disagreed about BlackBerry’s direction. Mr. Lazaridis believed BlackBerry’s future rested with the BlackBerry 10 line of phones, which were introduced this year. Mr. Balsillie wanted the company to focus more on services centered on the BlackBerry Messenger, or BBM, instant messaging service.

The divide continued after both men stepped down from their positions in January 2012 to become board members. People with knowledge of the board’s deliberations said the dispute prompted Mr. Balsillie’s decision to quit the board and liquidate all his BlackBerry shares.

In particular, Mr. Lazaridis objected to creating BBM apps for iPhones and Android-based handsets. (The company introduced such apps in October.) At its peak, BBM was a significant sales feature for BlackBerry handsets.

The BlackBerry 10 phones, as well as the BlackBerry PlayBook tablet computer, however, proved to be commercial failures and led directly to the company’s decision to effectively put itself up for sale.

Exactly how Mr. Lazaridis can revive BlackBerry’s fortunes in the critical United States smartphone market is not clear.

Unlike Apple, which designs its own processors, BlackBerry relies on Qualcomm for the chips that operate its new line of phones.

Although Qualcomm controls a large number of wireless communications patents, presumably it is also interested in some of the patents held by BlackBerry.

Michael J. de la Merced contributed reporting.

This post has been revised to reflect the following correction:

Correction: November 1, 2013

An earlier version of this post misstated when Fairfax Financial Holdings made its conditional offer for BlackBerry. It was in September, not October.



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