As BlackBerry looks for fresh start, its fate still looks grim

The BlackBerry Z30.

(Credit: Sarah Tew/CNET)

It keeps getting grimmer for BlackBerry.

The embattled smartphone manufacturer disclosed that the deal to take the company private was dead, and that it would instead take $1 billion in convertible debt financing. BlackBerry CEO Thorsten Heins, meanwhile, would also step down, to be replaced on an interim basis by former Sybase CEO John Chen.

The overhaul has the makings of another attempt at a fresh start for BlackBerry. The additional financing gives BlackBerry a little headroom to operate, adding to its existing cash position. Chen is a respected technology veteran well versed in the business tech world, which is where BlackBerry wants to head towards.

BlackBerry shares, however, fell nearly 19 percent to $6.31 on the news.

Make no mistake, BlackBerry is staring at a bleak fate ahead of it. That FairFax couldn't convince any backers to its proposed $4.7 billion deal, which is now clear was made without any foundation, only speaks to the tenuous reputation has with investors. With reports that BlackBerry was seeking deals with companies as out there as Facebook, it is likely the company looked long and hard for an acquirer.

BlackBerry had one shot at a comeback with BlackBerry 10 and Heins, and it failed.

It was never more evident than the company's fiscal second-quarter results, in which it posted a loss of nearly $1 billion -- largely due to the write-down of unsold Z10s -- and cut 4,500 jobs.

That led to the FairFax offer and a raft rumors about possible suitors, including one from founder and co-CEO Mike Lazaridis, as well as perennially rumored suitors such as Lenovo. But the collapse of the FairFax deal and the lack of alternative suggests interest in the company was tepid.

The company has largely ceded the consumer market to more heavily armed rivals such as Apple, Samsung, and even Microsoft, which has made slow, but steady, progress with Windows Phone. The launch of the BlackBerry Z30, which is slated to arrive at Verizon Wireless later this month, may represent the company's last hurrah in the smartphone business.

Outgoing BlackBerry CEO Thorsten Heins.

(Credit: Sarah Tew/CNET)

BlackBerry, for its part, hasn't completely given up on the smartphone business. Vivek Bhardwaj, head of BlackBerry's software portfolio, told reporters last week that he was attempting to ignore the financial drama and focused on putting out good products, arguing that customers tend not to pay attention to the financial state of their mobile device provider.

But BlackBerry's in a different situation. Because it handles sensitive information with large businesses and government clients, its customers are likely heavily scrutinizing the situation with the company. Companies considering BlackBerry's mobile device management system, for instance, may be reluctant to commit to it due to concerns over its long-term viability. All of this continued drama and the ceaseless rumors has to be disconcerting to potential customers.

That's a critical issue as BlackBerry moves to a services and device management model and away from pure consumer smartphone devices. The company maintains a vision that it can sell business clients secure servers and business-focused smartphones. But with more companies letting their employees bring in their own phones, it's increasingly unclear where BlackBerrys would fit into this new bring-your-own-device world.

It's also not clear whether BlackBerry would make a phone beyond the Z30. When pressed about new products in the pipeline, Bhardwaj quipped that you "should check the Internet," but otherwise remained mum.

The bigger question: if BlackBerry builds another phone, will anyone be left to buy it?