Is BlackBerry Ltd too Canadian to fail?

Is BlackBerry Ltd too Canadian to fail?

Terence Corcoran | 27/09/13 5:33 PM ET
More from Terence Corcoran | @terencecorcoran

Saving BlackBerry to keep it Canadian ignores the success in our history of failure

Some already call him the Warren Buffett of Canada, but if Prem Watsa hopes to hold on to that flattering label he might want to drop the Canadian nationalism that seems to be driving his attempt to take control of BlackBerry Ltd. A big nationalist spirit pops up whenever the head of Fairfax Financial talks about his US$4.7-billion plan to buy all the outstanding shares of the world famous smart phone maker. As he put it the other day, “One of the reasons I went on the [BlackBerry] board, and I said it publicly, was to keep the company in Canada and to make sure it survives and exists in Canada. It is one of Canada’s most successful companies. Companies do fall on hard times and they come back again and we expect this company to do the same.”We must assume Mr. Watsa is serious when he rolls out the Canadian angle as one of his prime motivations. We must accept that he genuinely wants to save BlackBerry not just because he believes there’s a business there to be salvaged and revived, but because BlackBerry is a Canadian enterprise that must be saved because it is Canadian.

Thousands and perhaps even millions of Canadians probably share the same emotional if not quite rational view. The company founded by Jim Balsillie and Mike Lazaridis now apparently needs to be coddled and protected. At BlackBerry’s peak, the two CEOs became local heroes, iconic corporate stars, symbols of a collective national achievement who somehow represent features of our national psyche. They are us, we are them.

It’s not the first time.

Back in 2009, Mr. Lazaridis himself played to the nationalist gallery when he appeared before a House of Commons committee to argue against the sale of some Nortel Network assets to a Swedish company.  To make his point, he hauled out the tired old industrial policy tear-jerker yarn about the Avro Arrow, the Canadian-made and Canadian-designed fighter jet killed by Ottawa in 1959. “Fifty years later we consider the disposition of another beachhead [Nortel] built by Canadian ingenuity,” he told Parliamentarians. “Let us learn from our history and not make the same mistake again.”

At different points in history, Canadians have sought to preserve businesses as if they were part of our identity. We want to hold on to them. Protect and own them when they’re great, prop them up when they are weak, cry for them when they die, avenge them when they are buried.

Except, of course, that Canadian corporate history is littered with the bones of enterprises that came and went, died young or failed in old age, and are now barely remembered, if at all. “Some firms are so far gone we can’t even remember them,” said the great Canadian historian, Michael Bliss, in an interview this week.

In his 1987 book, Northern Enterprise: Five Centuries of Canadian Business, the former University of Toronto professor unsentimentally documented the rise and fall of whole industries and scores of companies. During the interview we came up with dozens of once-famous Canadians companies, BlackBerry forerunners that not too long ago were seen as Too Canadian To Fail or too important to fall into the hands of foreigners.

The global tractor giant Massey-Ferguson; the national retail powerhouse T. Eaton Co.; the Tilden car rental business; the steel giants Stelco, Algoma and Dofasco; Dome Petroleum; the household appliance makers Inglis and GSW; telecom equipment giant Nortel Networks; the Reichmann’s Olympia & York real estate empire.

And who can forget — except most Canadians have forgotten or have likely never heard of — Michael Cowpland and Terry Matthews, the two flamboyant Ottawa whiz kids who founded Mitel Networks in 1973. Mitel Networks became a world-beater in the telecom switching business. Along with Nortel, Mitel was at the heart of Ottawa’s Silicon Valley North, before it ran into financial troubles in the 1980s and was sold to British Telecom, which a few years later broke the company up. Various Mitel pieces continued to operate for years.

Cowpland and Matthews were the Balsillie and Lazaridis of the 1980s. Whether BlackBerry will evolve along the lines of Mitel, with various parts continuing to exist for years, would be nothing but speculation at the moment.

The idea that companies such as BlackBerry or Mitel or Eaton’s or Massey-Ferguson can and somehow should endure is mostly a fantasy of the moment that ignores history. Businesses and their executives are sometimes treated like sports heroes whose teams we want and expect to win. When sports teams lose, however, we shrug and move on to next year. The same should be true for businesses that run into losing streaks and often disappear. Tomorrow is another day and another batch of entrepreneurs and circumstances will conspire to produce new successes — and more failures.

In a comment on his Northern Enterprise history years ago, Mr. Bliss saw Canadian business failures as a natural part of the landscape: “One of the strongest themes in my book is failure in business.”

The last chapter begins with the collapse of Massey-Ferguson, the farm equipment giant whose plants once dominated vast swaths of central Toronto real estate now overrun with massive condo developments. “One of my strongest beliefs about business history generally is that you have to write the history of failure as well as success. And if the book does nothing else, it conveys a sense of a business world which is fraught with peril, hazard and frequent failure.”

In BlackBerry’s case, blundering management, bad decisions and a co-opted board of directors are often portrayed as the creators of the hazards that eventually felled the company. What history will likely show, however, is that BlackBerry was wiped out by a hurricane called Apple. The iPhone became a massive force that swept the smart phone industry with a fury that was likely beyond the control of anything BlackBerry could or might have done.

So too with Nortel, the other great Canadian tech giant that, ultimately, was felled by rapidly changing global markets. Could Nortel have survived with better, smarter managers? Possibly. But it is certain that it would have been foolish for anyone to have mounted a political or business campaign to save the company and keep it Canadian for the sake of keeping it Canadian.

As the BlackBerry story unfolds, it looks like the tech rocket the company launched in the Kitchener-Waterloo area will provide a foundation for new activity. Thousands of jobs will be lost at BlackBerry, but many in the region are confident thousands more jobs will be created as new companies emerge to capitalize on the legacy the company leaves behind.

Even if that hope were likely false and new jobs created were unlikely to replace the losses, there’s still no reason to fall into a anxious nationalist lament and force government or financial institution to support BlackBerry as a going Canadian concern. That’s the preference of some, including Jim Stanford, economist at the Canadian Auto Workers/Unifor union. In a tweet this past week, he asked: “Does govt have ‘any’ role to play in Cdn high-tech like Blackberry? Or just let the ‘chips’ fall where they may?” The right answer is: No and Yes.

If Prem Watsa has a viable plan to save BlackBerry and keep it whole in Canada as a Canadian firm, that’s fine. If it works he’ll be the next Canadian corporate hero and earn his title as Canada’s Warren Buffett.

If Mr. Watsa doesn’t succeed, Canadians — along with BlackBerry investors and users everywhere — will be saddened. But that’s the nature of enterprise in Canada, filled — as Mr. Bliss put it — with peril, hazard and frequent failure.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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