Canadian Industry Minister James Moore said it’s up to BlackBerry Ltd. (BB) to pull off a turnaround on its own, signaling the government has no plans to intervene in the struggling smartphone maker’s future.
“This is a Canadian company with a long track record of stirring up innovation and important changes in the products we all use,” Moore said today in an interview in his Ottawa office. “They employ a great number of Canadians. It’s been a source of Canadian pride and we hope that they do well.”
Moore, who was appointed industry minister last month, said the company is having a “hard time” with its new line of smartphones.
“It hasn’t gone off with the success that they hoped that it would, and it’s for them to engage the market and provide devices and services, platforms, content that the market will receive well,” he said.
Moore’s comments come after shares of the Waterloo, Ontario-based company jumped on Aug. 12, when BlackBerry announced plans to form a board committee to consider a potential sale, as well as joint ventures and partnerships.
The announcement built on a move last year when BlackBerry hired JPMorgan Chase & Co. (JPM) and RBC Capital Markets to advise the company on strategic alternatives. At the time, Chief Executive Officer Thorsten Heins said a sale wasn’t the “main direction” he was considering. The company’s outlook has worsened since then, with the revamped BlackBerry 10 seeing lackluster demand.
Prem Watsa, a Toronto businessman and BlackBerry’s largest shareholder, said Aug. 12 he would step down from the company’s board, raising the possibility he may play a role in rescuing the company.
Some of Canada’s biggest pension funds, including Canada Pension Plan Investment Board, have expressed interest in financing a deal to take the company private if approached.
Prime Minister Stephen Harper’s government, while declining to comment on any specific takeover possibilities, had previously signaled it would prefer the company remain Canadian. The government automatically reviews all foreign takeovers of companies with assets valued at more than C$344 million ($329 million) to determine if they’re in the national interest.
“When you have a national champion like BlackBerry, you hope they remain a national champion,” former industry minister Christian Paradis, Moore’s predecessor, said in a March 27 interview in Ottawa.
BlackBerry dropped 2.5 percent to C$10.73 in Toronto trading, for a market value of C$5.6 billion. The stock has fallen 9 percent this year.
BlackBerry’s dimming prospects as an independent company pose a challenge to Harper’s government, which has intervened to protect troubled companies in the past. Canada agreed to invest $9.5 billion, along with the Ontario government, in General Motors Co. as part of the automaker’s 2009 bailout.
Canada also blocked BHP Billiton Ltd.’s $40 billion hostile takeover of Potash Corp. of Saskatchewan Inc. in 2010, after Saskatchewan Premier Brad Wall called potash a “strategic resource” for the province.
BlackBerry is Canada’s biggest publicly traded corporate spender in the country on research and development, according to data compiled by Bloomberg.
A sale could help BlackBerry avoid the fate of another former star of the Canadian technology industry: Nortel Networks Corp. That company, which was once North America’s largest telephone-equipment maker, filed for bankruptcy in January 2009 before being broken up and sold at auction to foreign buyers.
In a Jan. 22 interview, Paradis said the government hopes companies such as BlackBerry “grow up organically to become global players.”
While Beijing-based Lenovo Group Ltd. (992) has shown interest in acquiring BlackBerry, Harper’s government could scuttle such a deal on national security grounds because BlackBerry is used by many government institutions and corporations, according to Ian Lee, assistant professor at Carleton University’s Sprott School of Business in Ottawa.
‘The only interference I would see is if a Chinese company, whether a government or private corporation, tries to buy it,’’ said Lee, who has attended economic retreats organized by Finance Minister Jim Flaherty, in an Aug. 12 phone interview. “They would block it.”
The government weighed new regulations on foreign wireless suppliers amid concern over the networking equipment provided by Huawei Technologies Co. to carriers such as BCE Inc. (BCE) and Telus Corp. (T), a person familiar with the matter told Bloomberg in March.
The government last year approved Cnooc Ltd. (883)’s $15.1 billion takeover of Calgary-based energy producer Nexen Inc. At the same time, the government said state-owned firms would only be allowed to buy businesses in Canada’s oil sands under “exceptional circumstances.”
Flaherty said in January the government would “look carefully” at a bid for BlackBerry by Lenovo.
Moore said he didn’t want to speculate on any specific takeover scenarios for BlackBerry. The government evaluates takeovers on a case-by-case basis, he said.
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