Interim BlackBerry CEO Chen has turnaround experience, but faces challenges

BlackBerry (NASDAQ:BBRY) is turning to former Sybase CEO John Chen to turn around its struggling business as its interim CEO, and will be banking on his history as a turnaround specialist. However, despite his background, Chen faces formidable challenges in reviving BlackBerry, analysts say.

john chen ceo blackberry sybase

Chen

"There is a lot to do," Chen told Reuters in an interview. "There are a lot of challenges or otherwise I would not be interested." Chen also vowed that he would not axe BlackBerry's money-losing handset business.

Chen led Sybase from 1998 until SAP bought the company in 2010 and is widely credited with saving Sybase from bankruptcy. Sybase had lost much of its corporate database business to Oracle, IBM and Microsoft (NASDAQ:MSFT). Chen helped turn around Sybase's core business, and then moved it into producing software for creating applications, mainly for the enterprise market, for use on mobile devices and to manage wireless networks.

Chen will be appointed executive chair of BlackBerry's board and will be responsible for the strategic direction, strategic relationships and organizational goals of BlackBerry. He is coming in following the ousted Thorsten Heins, a company insider who was unable to turn around the firm's sales with its BlackBerry 10 smartphones, which many analysts said were too little, too late.

BlackBerry announced Monday it halted its plans to go private in a $4.7 billion deal led by Fairfax Financial Holdings, its largest shareholder, and will instead receive a $1 billion capital injection from Fairfax and other institutional investors.

The new BlackBerry chief will not only have to contend with restive investors--who showed their displeasure with the news that BlackBerry would not be sold by tanking the company's share price--but also its customers and employees. Chen has said his turnaround at Sybase was based on rebuilding confidence both inside and outside the company.

"You have to build the confidence," Chen told Wall Street Journal in 2005. "Most people jump in and talk about strategy, talk about products--those are important aspects. [But] the most important people whose confidence you need to rebuild is the employees. The second is the customers, then the shareholders. It has to be in that order: If you don't have [confident] employees, the customers will not be well treated, which means they will abandon you, and that will make the shareholders unhappy."

Still, Chen will face a daunting task in rebuilding BlackBerry. The company has indicated it plans to move away from the consumer smartphone market to focus on enterprise business, which is Chen's bread and butter, but the firm that once had more than half of North America's smartphone market now has a market share of just 3.4 percent, according to Gartner.

"While we maintain our view that a transformation into a smaller, profitable entity is possible, we believe BBRY will go through a difficult transition," Wells Fargo analysts Maynard Um and Munjal Shah wrote in a research note. "We note the strategy has yet to be communicated in detail (with some differing interpretations by media, particularly around hardware) and whether the current strategy will remain in place, be accelerated, etc. BBRY also seems to be struggling with its enterprise vs. consumer identity (focus on Messenger, which we see as more of a consumer application versus its stated enterprise focused strategy)."

The analysts wrote that BlackBerry should "aggressively focus on putting BlackBerry email on other platforms (iOS and Android in particular) as we would argue a major part of the company's challenge is coming from the Bring Your Own Device (BYOD) trend." They wrote that if BlackBerry "had the ability to allow enterprises to utilize existing [BlackBerry Enterprise Service] through an iOS or Android app, it would help stem some churn. We believe this is what management should focus on rather than on looking for a monetization strategy on its BlackBerry Messenger."

Meanwhile, the Journal notes that Chen's background in advising the U.S. government on international trade issues could be a potential strong suit if BlackBerry decides to consider any international deals. In 2005, Chen was appointed by former President George W. Bush to join the President's Export Council, a national advisory committee on international trade.

"BlackBerry right now can be viewed as a binary play," Steven  Davidoff, a professor at the Michael E. Moritz College of Law at Ohio State University, wrote in the New York Times. "It will either fail miserably or be a remarkable turnaround. Fairfax's exercise price for these BlackBerry shares is a high premium over the current market price of about $6.90. But if any turnaround plan succeeds, the company will be worth far more. In some ways, the equity here is protection from the low chance of a BlackBerry turnaround."

For more:
- see this Reuters article
- see this WSJ article (sub. req.)
- see this NYT article
- see this The Verge article
- see this AllThingsD article

Related Articles:
BlackBerry halts sale process, gets $1B investment and ousts CEO Heins
Report: BlackBerry met with Facebook to discuss potential bid
Report: Former Apple CEO Sculley considers BlackBerry purchase
BlackBerry trumpets 10M downloads of cross-platform Messenger app
Report: Lenovo looking at potential BlackBerry bid
BlackBerry issues open letter to customers, says it's here to stay

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