BlackBerry watchers see an uphill struggle Even before Prem Watsa's audacious bid yesterday to take BlackBerry private in a cash transaction valued at $4.7bn, industry analysts were questioning whether the Canadian company could survive. Mr Watsa insisted on Monday that, if approved, his bid would "open an exciting new private chapter for BlackBerry, its customers, carriers and employees." But many analysts and investors remain unconvinced. While they concede that it may be easier for Fairfax Financial, or another financial buyer, to undertake the unpalatable business of restructuring BlackBerry as a private company out of the public spotlight, most believe that any new owner would face an uphill struggle to stabilise the business. "Private ownership will provide breathing space as strategic options are assessed," said Ben Wood, chief of research at CCS Insight. The profit warning on Friday was a clear indication of the extreme difficulties BlackBerry faces in the hyper-competitive mobile devices business. This latest bid underlines the seriousness of the company's situation. By going private, the structure and purpose of the company can be redefined behind closed doors. Jan Dawson of Ovum said: "Normally, companies are taken private in order to give a long-term strategy time to pay off without the hassles of short-term investor scrutiny. But BlackBerry's key problem for the past couple of years has been the lack of such a long-term strategy. It simply hasn't articulated a way to rebuild its business as its device sales drop precipitously. Unless Fairfax plans to radically change or accelerate BlackBerry's strategy, it's unlikely to be able to turn the company round. After the company said on Friday that it would abandon the consumer market with the loss of 4,500 jobs and report a near $1bn operating loss in the latest quarter, Mark Sue of RBC Capital Markets said: "It's a race against time for BlackBerry, and preserving cash may be of utmost importance as the pace of business deterioration accelerates." At the heart of the debate about BlackBerry's future are several key questions. First, will the remaining BlackBerry corporate customers, many of which allow their employees to choose their own devices or bring their personal handsets to work - a trend dubbed BYOD (bring your own device) - remain loyal to the brand? Most analysts believe it will be increasingly difficult for IT departments to justify a "buy BlackBerry" policy when many of their senior executives and most new recruits prefer using iPhones and Android devices. "Many IT departments have started looking at BlackBerry alternatives," say analysts at Nomura, who believe that this process is likely to be accelerated, "given the increasing uncertainty in the company's long-term outlook that this quarter's losses have highlighted." Even if BlackBerry manages to halt defections among its corporate user base, many believe the company will still struggle to survive as a niche hardware manufacturer in a market where scale matters. BlackBerry's supply chain relies on scale for profitability, and it will never again be able to achieve the scale necessary to make money on devices. It's likely that BlackBerry will be out of the device business entirely by the middle of next year Jan Dawson, Ovum "BlackBerry's supply chain relies on scale for profitability, and it will never again be able to achieve the scale necessary to make money on devices," says Jan Dawson. It's likely that BlackBerry will be out of the device business entirely by the middle of next year. If BlackBerry's new owners are indeed eventually forced to abandon the hardware market, where else might they find value? In the past, investors and analysts have identified three main asset areas - BlackBerry's popular mobile device management software used by companies to manage their mobile devices; the company's BlackBerry Messenger network; and finally its product portfolio. Recently, however, they have also begun to question the underlying value of these assets as well. It's not the devices and hardware where BlackBerry has value, but rather its software and mobile device management service. But as Apple and Android improve their respective enterprise and device management tools, BlackBerry's advantage even there may diminish," says Brian Proffitt, a technology expert and adjunct instructor of management in the University of Notre Dame's Mendoza College of Business. Roughly 15m out of BlackBerry's remaining 72m subscribers are believed to be corporate subscribers, but as RBC's Mark Sue notes, "this is an eroding installed base," and the market for mobile device management software is "getting very crowded." Similarly, BlackBerry had already announced plans to make its BBM messaging service available to other smartphone owners, but these plans suffered a setback at the weekend when the pre-release apps needed to make this happen were leaked online. While the private network that BBM runs on ensures greater privacy than the public internet, the real value of the service has yet to be proved. Bankers and analysts are also unsure about the true value of BlackBerry's extensive patent portfolio, thought to number about 8,000 mostly related to mobile data access. RBC estimates that this could be worth between $1.5bn or $3 a share, and $2.3bn or $4 a share. But, like others, it notes that after Google acquired Motorola and Microsoft announced plans to buy Nokia, the market for mobile patents could be quite thin. If that turns out to be an accurate assessment, even the consortium's $4.7bn offer for BlackBerry - less the $2.6bn in cash that BlackBerry still has on its books - could end up looking generous.