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TheStreet Open House

BlackBerry Founder Lazaridis Explores Takeover

NEW YORK ( TheStreet) -- BlackBerry (BBRY - Get Report) founder and former co-CEO Mike Lazaridis is weighing a takeover of the struggling smartphone pioneer and has hired Goldman Sachs and Centerview Partners to advise on any strategic transactions.

BlackBerry is considering strategic options such as a sale of the company in the wake of a disastrous second-quarter earnings report, which fell far short of Wall Street consensus and included a $1 billion inventory writedown related to its Z10 smartphone. The Waterloo, Ontario-based company also said it would lay off 40% of its workforce in a realignment of its business away from the consumer smartphone market.

Lazaridis' emergence as a possible bidder on BlackBerry, either individually or with a strategic consortium, indicates that the smartphone maker's sale process is heating up. In September, BlackBerry's largest shareholder Fairfax Financial said it intended to buy the company at $9 a share, subject to due diligence and financing arrangements from a syndicate of U.S. and Canadian lenders.

Now, it appears BlackBerry's two largest shareholders are both interested in some type of strategic deal. Lazaridis' intent is spelled out in a Thursday filing with the Securities and Exchange Commission. Filings as of June 30 show Fairfax Financial owns 9.89% of BlackBerry's outstanding shares.

Lazaridis said he would consider increasing his stake in BlackBerry as high as a full takeover of the company. He also said in the Thursday filing that he could submit indications of interest for BlackBerry, engage the company's board or even submit a formal offer to a Special Committee running the sale process.

While Lazaridis said he could discuss potential transactions such as a joint bid or proposal for asset sales with other BlackBerry shareholders or market participants, no mention of a transaction was made in the filing. Lazaridis also has the ability to sell his shares.

" There can be no assurance that the Reporting Persons will take any of the actions set forth above," the filing states.

Lazaridis will work with Douglas E. Fregin, a co-founder and former BlackBerry vice president on any potential bid. Fregin also holds a significant investment in Blackberry shares.

Whether Lazaridis and Fregin come up with a proposal for BlackBerry remains unclear. It also isn't clear if Fairfax will submit a formal offer for BlackBerry, or at what price.

Fairfax's intent to buy BlackBerry for $4.7 billion is subject to receiving financing commitments from Bank of America Merrill Lynch and BMO Capital Markets and the firm's own due diligence. Fairfax's founder and CEO, Prem Watsa, was previously a board member at BlackBerry so it is unclear how a due diligence process would uncover any new financial insight.

In mid-September, BlackBerry announced a major restructuring that will cut the company's workforce by 40%. Its second-quarter earnings were also taken by some analysts as the biggest-ever miss in the tech sector.

BlackBerry's second-quarter revenue came in at $1.6 billion, or about half of consensus Wall Street estimates. Of that revenue, 50% is expected to come from BlackBerry's various IT and security services. Meanwhile, the company recorded an inventory writedown of about $1 billion as a result of a glut of unsold BlackBerry Z10 handsets.

It is unclear whether BlackBerry can truly re-focus on the enterprise market as it said it in its planned workforce restructuring. BlackBerry's security and services offering does win praise from business professionals, however, without a commitment to the company's handset business it is unclear whether those users would flee to other networks.

BlackBerry shares reversed early losses in Thursday trading and were higher by nearly 1% at $8.18. Shares have lost ground since Fairfax's informal proposal and remain well below the investment manager's $9 a share price.

-- Written by Antoine Gara in New York.

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