Home' Trinidad and Tobago Guardian : September 26th 2013 Contents SEPTEMBER 2013 • WEEK FOUR www.guardian.co.tt BUSINESS GUARDIAN
COMMENTARY | BG3
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The story of the decline, fall and the proposed sale
of Finland's Nokia to Micrsoft and Canada's
Blackberry to the private equity firm Fairfax
Financial Holdings should serve as a cautionary
tale to Caribbean governments and businesses.
At the beginning of this month, Microsoft---which is itself
threatened with financial and technological irrelevance---agreed
to buy Nokia's mobile phone business for US$7.2 billion.
Between 1998 and 2012, Nokia was the world's largest vendor
of mobile phones, according to a BBC report in April this year.
Its lead in mobile phones in general has been whittled away
by scores of "me-too" phone producers, while in the much
higher margin smartphone market, Apple and Samsung have
In a sense, Blackberry's decline is even sadder.
Monday's offer by Fairfax Financial represents a devastating
loss of value for the smartphone's shareholders and potentially
the end of a viable technology platform for its millions of
The reported price tag of the Blackberry transaction, US$9
a share or US$4.7 billion, means that the smartphone maker's
value has declined by nearly 90 per cent in just over five
years---from US$149.90 in June 2008 to US$9 today.
Another interesting fact about the sale of Blackberry is that
the proposed purchaser, Fairfax Financial, is run by Canadian
private equity investor Prem Watsa, who once sat on the Black-
berry board and whose firm is the largest shareholder in the
company with about ten per cent.
In a statement, Watsa said: "We can deliver immediate value
to shareholders, while we continue the execution of a long-
term strategy in a private company with a focus on delivering
superior and secure enterprise solutions to the Blackberry
customers around the world."
This seems like an acknowledgement that the company will
exit the consumer market and focus on producing smartphones
for what is referred to as the enterprise market (which is
basically smartphones for business users. But it could be that
Mr Watsa simply intends to strip Blackberry's intellectual
property and sell these off for more than he paid for the entire
On Tuesday, in an analysis by Reuters, a senior vice president
at First Asset Investment Management, John Stephenson, said:
"What they're trying to do is take it out of the public market,
restructure it, sell off the parts and maybe have it focus on
being a platform for enterprise."
The truth about Blackberry is that its smartphones are no
longer selling as they used to at its peak, when the company
was one of the dominant players in the market for the devices
with 19.5 per cent global smartphone market in 2008. A recent
report by Gartner, the IT research firm, indicated that BlackBerry
accounted for just 2.8 per cent of worldwide smartphone sales
in the first half of 2013.
Just last Friday, Blackberry announced it would have to take
a writedown of its future profits to the tune of Can$900
million as it forecast losses due to a growing inventory of
unsold (and probably unsellable) devices.
The failure of both Nokia and Blackberry is mainly due to
their lack of speed in reacting to transformational changes in
the fast-moving smartphone business.
While I may not have the expertise of Guardian's technology
correspondent and columnist Mark Lyndersay in this area, it
seems to me that both Nokia and Blackberry failed to anticipate
the potential mass market appeal of smartphones and failed
to see that the market was moving towards mobile devices
that allowed easy access to applications (called apps) by users.
Lesson for the Caribbean
T&T, of course, has experienced its share of recent tragic
corporate collapses of shareholder value: Clico, Angostura and
TCL come to mind.
Interestingly, all three of these have been saved, as of the
time of writing, from the fate of Nokia and Blackberry by the
action of the Government: direct intervention in the case of
Angostura and Clico, into which the Government pumped an
estimated $20 billion and put in place a board that was not
driven by former CL Financial executive chairman Lawrence
Duprey's insatiable appetite for acquisitions.
TCL has been saved from total collapse by the State reac-
tivating its capital expenditure programme after several years
of relative dormancy and also as a result of the failure of the
Government to eliminate the 15 per cent CET (common external
tariff) on cement imported into T&T from outside of the
The removal of the CET would have the impact of opening
the local and regional cement markets to competition from
external sources, which would lead to a substantial decline in
the price of the commodity offered by the competitor (which,
one assumes, would include Cemex, the largest cement producer
in the western hemisphere and the owner of 28 per cent of
In such a scenario, TCL would then be forced to either
match the reduced prices or see a reduction in its sales and
production as the price-sensitive local market migrated to the
While none of the three companies cited above was undone
by failure to anticipate shifts in their market, it can be argued
that both Clico and Angostura were almost undone by failures
of corporate governance. TCL, on the other hand, appears to
have structured its expansion plans back in 2004/2005 based
on the fatally flawed assumption that expansion of demand
for cement would continue to grow as it had done in the past.
It may be argued that no one could have foreseen the 2008
global financial crisis just as it may be agued that no one could
have foreseen the shift in the global smartphone market. The
counter to that wilful blindness is that booms and busts are
as much a part of capitalism as self-seeking company executives
and, in both the case of the global financial crisis and the shift
in smartphone demand, there were clear predictive voices.
It is often the case that dissenting voices are either talked
down or are reluctant to speak up because the boards on which
they sit have not created a climate that encourages critical
One suspects that was the case with Nokia and Blackberry
at their peaks, when the opinions of their founders or leading
lights prevailed against all opposition. It certainly was the case
within the CL Financial empire, as the evidence at the com-
mission of enquiry indicates. I am not sure about the corporate
governance at TCL, but I wonder whether eight or nine years
ago anyone raised the possibility that the cement demand
projections might have been on the optimistic side.
What we should learn from the sale of Nokia and Blackberry
is that it is the job of company directors to be continually
vigilant and continually questioning of the conventional wis-
What can we learn from
Prem Watsa, chief executive of Fairfax Financial Holdings
Lawerence Duprey, former chairman of CL Financial
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