TORONTO – Canada's industry minister said Wednesday the government won't block the $1.1 billion sale of Nortel Networks' wireless division to Sweden's Ericsson.
Canada could have blocked the sale on national security grounds or in an Investment Canada review, which can be undertaken if the book value of the asset exceeds $292 million.
Industry Minister Tony Clement said there is no basis for a federal review on national security grounds and the book value of the assets is $170 million. In addition, Ericsson is planning to offer jobs to 800 Nortel workers in Canada.
"While this transaction is clearly not subject to review it is also evident that this deal is very beneficial to Canada," Clement said.
"I should note that Ericsson has operations in Canada for over 56 years. It has invested over $2 billion dollars in research and development in Canada over the past 10 years and it employs over 1,900 Canadians."
He also said protectionism is the not the answer when the economy is trying to recover from a recession.
"If we change the rules for Nortel, then we subject ourselves to changed rules involving Canadian companies who are investing overseas," Clement said.
Clement noted that Ericsson is largely responsible for one of Canada's foremost wireless cellular systems and said its Canadian operations have contributed to over 300 patents to the scientific community.
Ericsson won an auction to buy the wireless division, which researches and develops products for advanced wireless telecom devices. It hopes to close the deal next month.
The Swedish company has said the deal to buy a majority of Nortel Networks' North American wireless business covers the older CDMA and newer LTE wireless businesses of Nortel's Carrier Networks unit.
Nortel, a former telecommunications equipment giant that at one point accounted for one-third of the market value on the entire Toronto Stock Exchange, filed for bankruptcy protection in Canada and the U.S. in January, one day before it was due to make a debt payment of $107 million.
The Canadian government's decision is sure to disappoint Canada-based BlackBerry maker Research in Motion, which has urged it to prevent the sale so it could buy the wireless division. RIM has said the transaction must be reviewed to ensure that Canada's national interests are met.
RIM also accused Nortel of imposing unfair conditions in the court-supervised auction of Nortel's assets and said it had been disqualified by a demand from Nortel that it agree not to acquire any other Nortel assets in a one-year period.
RIM has said it would be prepared to pay in the range of $1.1 billion for Nortel's newer LTE wireless business, which uses a wireless standard that's gaining acceptance in the market and would include patents useful for future development, and for its older Code-Division Multiple Access business, a wireless standard mostly used in the United States, along with other unspecified assets.
"RIM is disappointed by the government's decision but nonetheless resolved to continue investing in Canada's future and furthering RIM's global leadership in wireless innovation," the company said in an e-mailed statement.
Ontario Finance Minister Dwight Duncan has warned it would be a mistake to let Nortel's wireless technology go to a foreign company, and said it would endanger Canada's role as a world leader in telecommunications.
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Do BlackBerry makers have a secret code that would let police identify rioters?
By Sharon Churcher and Julie Moult
Last updated at 10:57 AM on 14th August 2011
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They are accused of playing a vital role in helping rioters to plot the violence that blighted Britain.
But when The Mail on Sunday tried to question Twitter and the makers of BlackBerry phones about the sinister use of their technology, Twitter’s chief executive mocked us and a journalist was forcefully told to leave BlackBerry’s HQ.
Their apparent refusal to co-operate follows David Cameron suggesting moves to ‘stop people communicating’ via social media ‘when we know they are plotting violence, disorder and criminality’.
Silent: Mike Lazarides, joint chief executive of Blackberry maker, Research In Motion was unavailable for comment about the sinister use of the BlackBerry Messanger service
Silent: Mike Lazarides, joint chief executive of Blackberry maker, Research In Motion was unavailable for comment about the sinister use of the BlackBerry Messanger service
BlackBerry maker Research in Motion (RIM) has insisted it will co-operate with the police investigation into claims that its virtually untraceable instant BlackBerry Messenger (BBM) service was used to help rioters plot the violence and looting.
But it has refused to disclose whether it possesses an electronic ‘master key’ that could decode messages and reveal the identity of users planning anarchy.
Twitter has refused to say whether it is helping police to locate those who used its service to co-ordinate the riots or whether it has given details of users to the authorities.
The luxury home of Mike Lazarides in Ontario, Canada
Manchester Central Labour MP Tony Lloyd said: ‘What we need is an attitude that says they’re looking at being part of the solution, not part of the problem. They should be part of a debate that’s socially useful, not just one which makes them money.’
When our reporter visited RIM’s offices in Waterloo, Ontario, to try to talk to the firm’s wealthy founders, she was ordered to leave the site by security guards.
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Mike Lazaridis, 51, the Turkish-born engineering genius who is the firm’s joint chief executive, was also unavailable for comment at his glass-walled mansion. RIM promotional material describes him as a ‘modern Leonardo da Vinci’.
Patrick Spence, RIM’s UK marketing director, was on holiday in Waterloo. His wife Erin said: ‘We heard about the riots. I’m trying not to think about it.’
The BlackBerry encryption system was devised by RIM scientist Hugh Hind. When a reporter phoned his home, a man was heard to shout: ‘Tell her there’s no chance in hell I will talk to her, ever.’
Riot police walk past a burning building in Croydon. south London during the third day of violence last Monday
Riot police walk past a burning building in Croydon. south London during the third day of violence last Monday
Last year RIM, with a turnover of £2.2 billion, was forced to issue a statement denying it held a master key to decode encrypted messages.
Nigel Stanley, head of IT security practice at technology research consultancy Bloor, said breaking the code ‘is like trying to reassemble fragments of glass from a broken window . . . it would take thousands of years.
That leaves the possibility that RIM has a master key which would give it access to every message sent by BBM customers.
Twitter’s chief executive Dick Costolo declined an opportunity to defend the company against growing calls for it to be temporarily shut in the event of future riots.
Instead, Mr Costolo posted a series of tweets on Thursday mocking The Mail on Sunday’s attempts to reach him at home in ‘working hours’.
A burnt down, The Carpet Right building pictured after the riots in Tottenham last Sunday
A burnt down, The Carpet Right building pictured after the riots in Tottenham last Sunday
He added: ‘We have coyotes and bobcats in the neighbourhood and they can smell visitors.’
On Friday night at his £2 million house near San Francisco, he refused our request for an interview, saying: ‘No, not tonight.’
Repeated attempts to contact several members of the board also received little, if any, response.
On Friday, we asked the public relations company which represents RIM whether the company stood by its statement of a year ago, which claimed it has no way of accessing messages sent via its BBM system.
A spokesman would only say: ‘We welcome the opportunity for consultation together with other companies in the technology and telecommunication industry. RIM complies with UK privacy laws and the Regulation of Investigatory Powers Act.’
Read more: http://www.dailymail.co.uk/news/article-2025783/UK-riots-Do-BlackBerry-makers-secret-code-let-police-identify-rioters.html#ixzz1V05takfl
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Canada's Flaherty says RIM to set own fate
Fri, Mar 30 14:10 PM EDT
TORONTO, March 30 (Reuters) - Asked if the Canadian government would accept at takeover of Research In Motion, Canadian Finance Minister Jim Flaherty said on Friday that the BlackBerry maker would set its own fate.
"RIM is a private company that trades and has shareholders of course so ... they will be the masters of their own destiny. We would like RIM obviously to be successful as a Canadian company, which it has been, a very innovative successful company. We hope that that would persist," he told reporters in Toronto.
Smartphone maker Research In Motion reported fourth quarter GAAP net loss of $125 million or $0.24 per share sharply down from net income of $934 million or $1.78 per share in the same quarter of fiscal 2011. Adjusted net income for the latest quarter came in at $418 million or $0.80 per share, missing consensus estimates for an earnings of $0.81 per share for the quarter. Escalating investors' anxiety, RIM said that it expects continued pressure on revenue and earnings throughout fiscal 2013 and company noted that it will no longer provide specific quantitative guidance. The stock was up nearly 2 percent.
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Exclusive: Former RIM boss sought strategy shift before he quit
Fri, Apr 13 06:51 AM EDT
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By Alastair Sharp
TORONTO (Reuters) - Former Research In Motion co-chief executive Jim Balsillie sought to reinvent the BlackBerry smartphone maker with a radical shift in strategy before he stepped down, two sources with knowledge of his plans said.
Balsillie hoped to allow major wireless companies in North America and Europe to provide service for non-BlackBerry devices routed through RIM's proprietary network, a major break with the BlackBerry-only strategy pursued by RIM since its inception.
The plan would have let the carriers use the RIM network to offer inexpensive data plans, limited to social media and instant messaging, to entice low-tier customers to upgrade from no-frills phones to smartphones.
But the talks with carriers led to discord at the highest levels of the troubled Canadian company, and Balsillie resigned as a director soon after he stepped down as co-CEO. His former partner at the helm, Mike Lazaridis, still has an active role.
The veto leaves RIM's focus squarely on a new generation of BlackBerry gadgets it promises will wow consumers. The devices will have to do just that, analysts say, to arrest the precipitous decline in market share suffered by RIM, the company that virtually invented mobile email more than a decade ago.
Balsillie's plan may have heralded a broader strategic move by RIM to define its high-margin network services - which bring in around $1 billion a quarter - as a business that's distinct from building and marketing the BlackBerry. That hardware business may have lost money last year.
Carriers may have seen value in the plan, which would have encouraged lower-value talk-and-text customers to upgrade to entry-level smartphone plans, with access limited to Twitter, Facebook, messaging and other social media platforms.
The package would have included RIM's BlackBerry Messenger application, a powerful tool that has kept many BlackBerry users faithful even as flashier gadgets from Apple Inc and running Google Inc's Android software beckon.
That said, the arrangement would have relied on RIM's private network, which crashed painfully last year, adding a layer of risk that some carriers might have shied away from.
The RIM network is integrated with cellular networks across the world. Managed from a string of data centers, RIM encrypts and compresses massive amounts of data it then pushes out to BlackBerry devices. It charges carriers a monthly subscription fee per user for the service.
The system allows the BlackBerry - and in theory other devices - to gobble up much less bandwidth. So routing non-BlackBerry traffic through RIM's servers would help carriers by easing strain on their networks.
RIM took a first step toward establishing the network as a standalone operation late last year with its Mobile Fusion software that gives corporate and government customers the option of linking iPhones and Android devices to their existing BlackBerry management systems.
But that does not offer outsiders the unique technology that encrypts data and pushes it out to the BlackBerry.
CLOSE RELATIONSHIPS
Balsillie developed close business relationships with hundreds of telecoms executives as RIM's chief salesman and dealmaker in the years of BlackBerry's most prodigious growth.
He was talking to AT&T Inc and Verizon Communications Inc in the United States, and Vodafone Group Plc, Deutsche Telekom AG, Telefonica SA and France Telecom SA in Europe, as well as at least one major Canadian carrier, the sources said.
RIM, which declined comment, already offers basic messaging and social media plans to BlackBerry users in many countries, something that has helped it drive growth, particularly in emerging markets.
The plans restrict Internet access to a few popular sites and are typically cheaper than the smallest per-gigabyte plan available for other gadgets.
RIM was well along the path, having developed software to deliver the service to users of the latest versions of Apple and Android operating systems. It had also studied the global potential of selling the service, one source said.
But before that could happen, RIM's new CEO Thorsten Heins, backed by Lazaridis and the board, rejected Balsillie's initiative in favor of a focus on next-generation BlackBerry 10 phones due later in the year, two sources said.
HARDWARE STRUGGLES
Balsillie's plan might have resonated with investors and analysts who have urged RIM to sell its hardware business as a way of salvaging some value from the company, whose shares have shed 80 percent since February last year.
RIM's BlackBerry devices have struggled to compete with Apple's iPhone and iPad and a slew of Android devices. RIM slashed more than $750 million from the value of its smartphone and tablet inventory in each of its last two quarters.
The company likely lost money on hardware sales in the fiscal year just ended, an analyst said on Tuesday.
Yet with the global smartphone boom showing no signs of abating, RIM could target a market six times larger than its existing BlackBerry base, former RBC Capital Market analyst Mike Abramsky wrote in a note last year advocating RIM split in two.
Some 1.55 billion mobile phones were shipped worldwide in 2011, of which less than one third were smartphones, according to research firm IDC. Only about 51 million were BlackBerries.
But smartphones will likely account for more than half of the 2.17 billion phones shipped in 2016, IDC said.
Assuming that RIM could sell its services for even a tiny portion of the new smartphones, while retaining its existing subscribers, its services business would expand meaningfully.
Verizon, Vodafone, France Telecom and Telefonica declined to comment. A Deutsche Telekom spokesman said the company was not aware of such a proposal.
Verizon Wireless is a joint venture of Verizon and Vodafone, while Deutsche Telekom also owns T-Mobile USA. France Telecom, Telefonica and Vodafone all have operations in emerging economies where RIM has notched most of its recent growth.
"OPEN TO ALL OPTIONS"
Balsillie and Lazaridis stepped down from their shared CEO roles in late January, and gave up roles as co-chairman of the board.
Lazaridis stayed on as vice-chair and head of a newly created innovation committee.
The pair, who together built Lazaridis' 1985 start-up into a global business with $20 billion in sales last year, handed the CEO job to Heins, a German-born former Siemens AG executive.
Heins initially said it would be wrong of RIM to focus on licensing its software or abandoning its integrated stance - where RIM ran its own software on its own phones, supported by its own network - and he certainly wasn't considering a sale.
But in late March, while reporting RIM's first quarterly loss since 2005, Heins abruptly said he was reviewing options such as partnerships, joint ventures, licensing and other ways to leverage RIM's assets. He did not rule out a sale.
"I did my own reality check on where the entire company really is," he said. "It is now very clear to me that substantial change is what RIM needs."
Those comments don't rule out talks with carriers about a plan like the one Balsillie proposed.
"There hasn't been any inconsistent 'back-and-forth' between Thorsten and carriers," a separate source familiar with the situation said, without confirming or denying that any talks had taken place.
Balsillie cut his last professional tie to the company on the day Heins opened the door to all those options, stepping down as a board director. He remains one of RIM's largest shareholders, with a 5 percent stake.
(Editing by Frank McGurty and Janet Guttsman)
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Exclusive: BlackBerry maker hires law firm for restructuring
Sat, Apr 21 00:32 AM EDT
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By Nadia Damouni and Alastair Sharp
NEW YORK/TORONTO (Reuters) - BlackBerry maker Research In Motion has hired law firm Milbank, Tweed, Hadley & McCloy LLP to work out a restructuring plan that could include selling assets, seeking joint ventures or licensing patents, people briefed on the matter said.
As part of the struggling Canadian smartphone maker's strategic review, the RIM board is discussing ways to boost revenue from its new BlackBerry 10 operating system and possibly opening up its proprietary network, the sources said.
At one point, RIM was hoping to add as much as $4 billion in revenue from deals with major telecom carriers, sources said.
"This is a very mature strategy and RIM was very far down the road with a lot of those discussions with carriers," one of the sources added.
The restructuring efforts come as the Blackberry maker tries to stem customer losses to Apple Inc's iPhone and smartphones running Google Inc's Android software.
RIM posted a $125 million loss in its most recent quarter as it wrote down BlackBerry inventories. It took an even larger hit on its underperforming PlayBook tablet computers three months earlier. RIM's stock has plunged 75 percent in the last 12 months, giving the company a market value under $7 billion.
Representatives for Milbank and RIM declined to comment.
A number of investment banks have approached RIM over the past several months, vying for a role as financial adviser. But for now, RIM is not expected to hire a banker unless it decides to sell off a major asset or if the company receives takeover interest from an industry competitor, the sources said.
RIM has worked with Milbank previously and also retains law firm Skadden, Arps, Slate, Meagher & Flom LLP and the consulting firm Monitor Group for strategic advice. The two firms were not immediately available for comment.
BALSILLIE'S PROPOSAL
RIM, which once dominated the smartphone market, appointed a new CEO, Thorsten Heins, in January when longtime co-CEOs Mike Lazaridis and Jim Balsillie resigned under pressure.
Before he left, Balsillie had led a three-pronged plan to double RIM's service revenue by allowing carriers to use its services for messaging, content delivery, and analytics on all smartphones, sources with knowledge of his plan told Reuters.
Balsillie's plan offered carriers a way to tempt budget customers to upgrade to smartphones, with a data plan restricted to social networking and messaging services.
The sources said it also involved a "carrier cloud" to compete with device-specific services such as Apple's iCloud and cross-platform products, like DropBox and Netflix.
RIM started talks with the world's largest telecom companies more than six months ago and they were still going on as late as January at the Consumer Electronics Show in Las Vegas.
But the board got cold feet on concerns about cost and fears that the company's smartphones could lose more market share if the popular BlackBerry Messenger chat system was available on other devices. Balsillie quit RIM's board in March.
Sources declined to discuss pricing details for the aborted plan, citing the potential for deals to still get done.
It was not clear how much of Balsillie's plan will be incorporated in the restructuring that Milbank is advising on.
STRATEGIC ACQUISITIONS
Since late 2010, RIM had been taking steps to make its network services available to other devices, and made a string of acquisitions to support that strategy, according to several sources with knowledge of the matter.
Last October, RIM bought Dublin-based digital content company Newbay Software, which stores photo and video albums, music, address books, calendars on its own servers and can deliver it to any Internet-connected device, including mobile phones, personal computers, tablets and televisions.
When RIM bought it, Newbay boasted more than 80 million subscribers and had relationships with many of the carriers that Balsillie was negotiating with.
Earlier in 2011, RIM bought small Swedish video-editing company Jaycut, German social gaming company Scoreloop in June, and Waterloo-based tinyHippos, which owned a cross-platform app testing tool.
(Reporting by Alastair Sharp in Toronto and Nadia Damouni in New York; Editing by Ron Popeski)
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