BlackBerry (NASDAQ:BBRY) said it will divest the majority of its real estate holdings in Canada, though the smartphone maker has said it will continue to have a strong presence in the country that it calls home.
The move is the latest that BlackBerry CEO John Chen has taken to reshape and refocus the company since taking the reins in November. Though BlackBerry downplayed the significance of the move, it said the properties to be offered for sale comprise more than 3 million square feet of space. In partnership with CBRE Limited, BlackBerry intends to strategically divest the majority of its commercial real estate portfolio through a combination of sale-leaseback and vacant asset sales.
"BlackBerry remains committed to being headquartered in Waterloo and having a strong presence in Canada along with other global hubs," Chen said in a statement. "This initiative will further enhance BlackBerry's financial flexibility, and will provide additional resources to support our operations as our business continues to evolve."
Most of BlackBerry's Canadian real-estate holdings are in Waterloo, where it has its headquarters, though it also has offices in Toronto and other parts of Ontario.
Nokia (NYSE:NOK) made a similar move in late 2012 to sell and lease back its headquarters in Finland in a bid to raise cash. That was before Nokia struck a deal to sell its handset unit to partner Microsoft (NASDAQ:MSFT) for $7.4 billion.
BlackBerry said it will not comment on the potential value of a sale and will disclose further information as required in connection with any definitive sale.
"Based on our estimates using Waterloo, Ontario per square foot prices, we conservatively estimate that the company could bring in roughly $600-700 million from the sale (buildings and leasehold improvements were held at $941MM at November 2013)," Wells Fargo analysts Maynard Um, Munjal Shah and Santosh Sankar wrote in a research note. "While we believe that the company will likely lease back the majority of the facilities, we think that the move aligns with CEO John Chen's shift to enterprise-focused software (asset-lite) and more importantly, further fortresses the balance sheet."
Chen, a former CEO of Sybase, is based in Silicon Valley and commutes to Waterloo, along with several other recently appointed executives, the Wall Street Journal noted. In December, BlackBerry posted a $4.4 billion quarterly loss.
However, the company's shares jumped on Tuesday after it was reported that the Defense Information Systems Agency said about 80,000 BlackBerrys will start being hooked up to the Defense Department's management system at the end of this month. That was a bright spot for BlackBerry as it seeks to defend its turf as a trusted smartphone provider for government agencies and enterprises, where it is clearly focusing under Chen after its BlackBerry 10 platform flopped last year with most consumers.
Meanwhile, John Sims, president of global enterprise services at BlackBerry, wrote in a company blog post that Samsung Electronics' Knox mobile security system is not up to snuff, especially after a security flaw was recently discovered in the software by Ben-Gurion University researchers.
Samsung noted earlier this month that it "verified that the exploit uses legitimate Android network functions in an unintended way to intercept unencrypted network connections from/to applications on the mobile device. This research did not identify a flaw or bug in Samsung KNOX or Android; it demonstrated a classic Man in the Middle (MitM) attack, which is possible at any point on the network to see unencrypted application data."
Nevertheless, Sims wrote that "coupled with previous issues that have come to light regarding their security, this critical vulnerability calls into question--is Knox ready for the enterprise and government customers who cannot risk the security of their mobile data? With Samsung still battle testing its enterprise platform and fixing security bugs, industries that require the most stringent security needs can trust that there's nothing more secure than a BlackBerry device managed by a BlackBerry Enterprise Server--period. And that's why we are the only enterprise mobility management vendor and handset maker that has received the Department of Defense 'Authority to Operate' certification."
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