Mumbai, Sept. 24: He is rich, famous and an Indian who places bets on things that others wouldn’t touch with a barge pole.
Meet Prem Watsa, 63, who grew up in Hyderabad, went to study chemical engineering in IIT Madras in the early seventies and then went to — Canada.
Canada? When all his mates from the IITs were going to the US?
Yes, he has never ever gone with the herd and he has almost always come up trumps.
They call him the Canadian Warren Buffett, the value investor who buys things cheap, sweats the investment and then makes big bucks when the valuation of the dog-in-the-house investment starts clambering off the floor.
But this time Watsa, who runs the Toronto-based insurance firm Fairfax Financial Holdings, has sent everyone into a tizzy by putting together a bunch of investors who are ready to fork out $4.7 billion to acquire BlackBerry, the smartphone pioneer that seems to be ready to fall off a cliff after its desperate effort to stake its future on the BlackBerry Z10, which was launched in January and then went horribly wrong.
It wasn’t as though the Z10 was a lousy product. It’s just that the market didn’t have the space to accommodate a product that tried to re-create user experience that was completely different from the one that Steve Jobs had conceived with the iPhone, which other rivals slavishly copied. The Z10 received rave reviews from the gadget geeks but the marketing sucked.
So, what does the Buffett-like value investor — who apparently named one of his sons after Ben Graham, the guru of value investing — see in BlackBerry which has been looking down the barrel of a gun for almost two years? Especially when the company said in a recent report that it expects to record a loss of almost $1 billion in the second quarter ended August and intends to lay off at least 40 per cent of the workforce by the end of the year?
Watsa seems pretty confident.
“We believe this transaction will open an exciting new private chapter for BlackBerry, its customers, carriers and employees. 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 BlackBerry customers around the world,” Watsa said.
It’s going to be hard to convince shareholders of BlackBerry — which was founded in 1984 but burst into the limelight in 1999 when it launched its unique Blackberry platform — to keep the faith when the ardour of its worldwide customers has started to cool for its product and service innovations.
But Watsa has the enviable record of pulling off some pretty audacious bets since he founded Fairfax Financial Holdings in 1985.
Like most Indian immigrants in the West, he came to Canada with $8 in his pocket to acquire a management degree from the Richard Ivey School of Business at the University of Western Ontario and a dream to conquer the world.
He is a savvy investor who predicted the crash of 1987, Japan’s meltdown in the 1990s and saw the housing collapse in the US and Canada in 2008. He bought stocks in companies ranging from pulp mills to speciality retailers and restaurant chains and fought off a herd attack by hedge funds betting against his insurance company in 2006.
His connection with BlackBerry dates back to the time when Mike Lazaridis, the co-founder of BlackBerry, invited Watsa to join the board. Lazaridis, one of the largest individual shareholders of the company, was forced out of the company in the purge of January 2012 when he and partner, Jim Balsillie, had to cede control to Thorsten Heins, CEO of BlackBerry.
It is interesting that Lazaridis was apparently mounting a bid for BlackBerry with private equity firm Carlyle when Watsa ran away with the game.
BlackBerry is sitting on a wealth of patents — and that will be one area that it can monetise. It has been also ready to open up its proprietary platform to other handset users. It’s going to be hard to hack its way out of the woods from here. But if Watsa is ready to stake his money on BlackBerry, you can bet the game isn’t over yet.