BlackBerry's bleak options: will suitors really pay for a wedding?

As BlackBerry's board of directors formally begin exploring "strategic alternatives," they'll find their options limited, according to two IT sectoranalysts. All the likely alternatives call for a much diminished company, or broken up into some software assets and a brand value that's declining every day.

The board announced Monday the creation of a special committee to explore options to "inhance value and increase scale in order to accelerate" deployment of its BlackBerry 10 mobile operating system and server applications. In theory, everything is on the table, according to the company's statement, including "possible joint ventures, strategic partnerships or alliances, a sale of the Company or other possible transactions."

But potential partners, and buyers, are unlikely to see the same opportunities as BlackBerry's board, given that it's new generation of smartphones, running the innovative BlackBerry 10 operating system, have failed to ignite consumer interest since being released earlier this year.

BlackBerry's stock surged to $10.91 on Monday, from its Friday close of $9.76 per share, before finally closing at $10.78. It's past 52-week range is $6.22  to $18.32. Its market capitalization on Monday was $5.38 billion.

"BlackBerry is really three companies," says Jack Gold, principal for J. Gold Associates, an IT research and strategy consultancy. "There's BlackBerry the Device, BlackBerry the Services and BlackBerry the Community. Each has differing value."

The new BlackBerry 10 phones have received mixed reviews. Many reviewers game BlackBerry an "A" for effort but said the first phones suffer by comparison to the high-end iPhone and Android rivals like Samsung Galaxy S III.

Services assets include the BlackBerry Enterprise Services 10 server, for securing and managing multiple mobile operating systems, secure messaging, and the well-regarded BlackBerry Messenger for text and now video chat and collaboration. "It includes all themobile device management [MDM]  stuff," says Gold. "A cloud-based, cross-platform solution [from BlackBerry] for MDM, mobile application management and security is the same market that companies like AirWatch and MobileIron have been going after. That could be an attractive stand alone [business], or an acquisition by one of the other  layers in that space."

The community includes 60 million Messenger users, according to Gold and a total of global base of roughly 90 million.  That base could possibly interest emerging smartphone makers in China and other parts of Asia, companies such as Huawei, ZTE and Tata, if they see those millions as evidence of still-existing brand value. Despite its massive decline in the U.S., "it's still a recognized brand," according to Gold.

"Could one of them buy instant brand recognition and leverage the market?" Gold asks. "They could under the right circumstances."

But the best outcome for BlackBerry is a leverage buyout that takes the company private, according to Gold. "Once that's done, you're a private business without stockholders or government overseers," he says.

But another analyst thinks there's less to BlackBerry's value than meets the eye.

"BlackBerry Messenger is the only viable, attractive asset for a prospective buyer," says Jack Narcotta, analyst with Technology Business Research. "The likelihood of BlackBerry existing as an independent software-only company is slim as its cash reserves. The other assets and [the] subscriber base simply lack the scale needed to support transforming [the current company] into that business model."

There's little that can be done to change that.

"[T]e fuel on the fire for BlackBerry as it exists today isn't so much that its software is lacking," Narcotta says. "It's that BlackBerry is being overwhelmed by the flood of Android and iOS devices coming over the walls into the enterprise."

If there is a buyer, the most likely candidate is Samsung, he says.  The Korean smartphone maker has launched over the past year two programs to improve Android mobile security and management. Samsung for Enterprise or SAFE improves security for Samsung phones and tablets targeted at enterprise users; and Knox provides security enhancements to the underlying Android operating system.

"Samsung emerges as the most likely vendor to scoop up BlackBerry Messenger and BlackBerry Enterprise Services [BES] and integrate them into Android," Narcotta says. "BBM dovetails with Samsung's Knox and SAFE security initiatives nicely. Most BB10 apps are ported versions of Android apps, somewhat streamlining the process for BBM's core kernels and software development kits to be 'Android-ized.'

Neither analyst expects large-scale disruptions for enterprise BlackBerry and BES users, in part because so many have been already embracing iOS and Android. Narcotta says BlackBerry's future as an acquisition isn't "ideal" for customers but he's confident there will be a path to new vendors and services over time.

"BlackBerry is not likely to simply cease to exist, and if you find benefit in BES, as many shops do, its not likely you will simply be orphaned any time soon," says Gold. "Contingency plans are good, but no need to panic."

Few Options for Weinstein Co. in Wake of MPAA 'Butler' Ruling (Analysis)

Forest Whitaker on the set of 'The Butler'
Tuesday’s ruling in an MPAA title registration arbitration puts the Weinstein Company in a quandary. As The Hollywood Reporter reported, the arbitrators held that the Weinstein Company could not use the title “The Butler” on its upcoming film because that previously served as the title of a 1916 short film that now belongs to the Warner Bros. library.

In response, the Weinstein Company issued a statement from veteran Supreme Court litigator David Boies that said, “The suggestion that there is a danger of confusion between TWC’s 2013 feature movie and a 1917 [sic] short that has not been shown in theaters, television, DVDs, or in any other way for almost a century makes no sense. The award has no purpose except to restrict competition and is contrary to public policy.”

We don’t know if Boies is quoting from the arbitration ruling – those documents aren’t public and neither Warner Bros. nor the Weinstein Company would supply a copy to THR – but “danger of confusion” isn’t the test under the MPAA system: identicality is (or, in some cases, similarity). Here, the titles are identical. Protection is generally perpetual; in some cases, the duration is only four years, but that doesn’t seem to be at issue here. The TRB does have an appeal process, but the rules for challenged titles are the same on appeal as in the initial process.

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None of that bodes well for the Weinstein Company. But what about Boies’ comment that the award restricts competition? That’s an antitrust argument, and at first glance it has some allure. Surely federal antitrust law – passed by Congress and enforced by agencies and judges – places some limits on what a mere industry association can do?

Actually, not so much, it seems. That’s because another law, the Federal Arbitration Act, requires judges to defer to arbitration agreements, such as the agreement that companies agree to when they sign up with the MPAA’s Title Registration Bureau (TRB). Says the 1925 statute, “A written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”

In recent decades, the Supreme Court has interpreted the FAA expansively, with the conservative majority on the Court using the statute to allow large companies to divert claims out of the court system and into arbitration. In many instances, that’s favored companies at the expense of consumers and employees, since it keep cases out of the hands of sympathetic juries, and frequently bars class actions as well.

It turns out that the Court’s latest case in this line of precedent was decided less than two weeks ago – and it involved an antitrust claim.

In the case, American Express Co. v. Italian Colors Restaurant, the plaintiff restaurant alleged that “American Express used its monopoly power in the market for charge cards to force merchants to accept credit cards at rates approximately 30% higher than the fees for competing credit cards.” The restaurant asserted that this was a violation of a key antitrust law, the Sherman Act, and brought a class action.

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Citing the FAA, Amex sought to enforce the arbitration clause in its merchant agreements, which also included a prohibition on class actions in arbitration. The restaurant countered that enforcing this prohibition would effectively strip it of its rights, because the case would be too expensive to bring on an individual, plaintiff by plaintiff basis. Expert witness fees alone would be in the hundreds of thousands of dollars at a minimum, whereas the most the restaurant stood to recover if it won a non-class action case was about $38,000.

By a 5-3 vote (with one Justice not participating), the Supreme Court turned away the restaurant’s objection. As a result of the FAA, said Justice Scalia for the majority, “courts must ‘rigorously enforce’ arbitration agreements according to their terms. . . . That holds true for claims that allege a violation of a federal statute, unless the FAA’s mandate has been ‘overridden by a contrary congressional command.’”

The decision then found no such contrary command in the antitrust laws as regarding class actions. Regarding the underlying substantive issue – the alleged antitrust violation – the decision said, “so long as the prospective litigant effectively may vindicate its statutory cause of action in the arbitral forum, the statute will continue to serve both its remedial and deterrent function.”

That may give Boies an opening, because the TRB rules don’t provide a mechanism for challenging the system itself on antitrust grounds (or any grounds at all). But the Supreme Court decision includes a dissent (by Justice Kagan) that, ironically, works against such an argument: “If the arbitration clause is enforceable, Amex has insulated itself from antitrust liability – even if it has in fact violated the law.”

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In other words, even an arbitration clause that snuffs out an antitrust claim will be upheld by the conservative majority on the Court.

As THR reported, Boies also argued in a letter to Warner Bros. on Wednesday that Warners had agreed to allow the Weinstein Company to use the title “in return for certain contributions that TWC agreed to make.” A source familiar with the dispute rejects the notion that there was any deal. That’s the sort of he-said she-said that a court is likely to say the Weinstein Company should have raised with the arbitrator. Perhaps it did so – in which case it evidently lost the argument. A court is unlikely to revisit the issue.

That all would seem to make a suit by the Weinstein Company against Warners a long shot at best. What about suing the MPAA? Boies wrote them on Wednesday too, saying “To the extent that the MPAA in concert with its members seeks to ‘permanently protect’ titles where there is no plausible claim of possible confusion, and no claim of actual damages, such an attempt would be a naked restraint on trade in violation of the anti-trust laws.”

But there are problems here. The TRB rules include a waiver of damages against the MPAA, TRB and related entities. That doesn’t preclude seeking an injunction against the rules, of course.

Even an injunction seems unlikely, though, because the Weinstein Company voluntarily and knowingly agreed to the arbitration process when it signed onto the TRB. And the Weinstein Company received a benefit – its own titles are protected from reuse by other TRB signatories and by MPAA members.

In essence, a suit against the MPAA is an attempt to make an end run around an unfavorable arbitration award. That’s exactly the sort of thing courts disfavor, as the 9th Circuit (the federal Court of Appeals that includes California) pointed out in a case involving a challenge to WGA credit arbitration, Marino v. Writers Guild of America.

Stepping back for a moment, it’s not even clear that an antitrust claim would have legs. After all, the arbitration award doesn’t prohibit the Weinstein Company from releasing its film; it just has to do so under a different name. That’s a restriction, of course, but intellectual property laws – and IP-related contracts – always impose restrictions. They provide monopolies of various sorts to the IP owner.

Boies and the Weinstein Company may have arguments to counter this point, but whether they’ll be able to get a court to even consider those arguments seems like a long shot. Arbitration may sometimes be a bed of nails, but under Supreme Court precedent, if those are the accommodations you agreed to, the courts won’t provide a mattress later.

Analysis: Snowden's options appear to narrow in bid to evade U.S. arrest

A television screen shows former U.S. spy agency contractor Edward Snowden during a news bulletin at a cafe at Moscow's Sheremetyevo airport June 26, 2013.

WASHINGTON/MOSCOW - Nearly a month after Edward Snowden exposed top secret U.S. surveillance programs, the former spy agency contractor looks no closer to winning asylum to evade prosecution at home - and his options appear to be narrowing.

Stuck in legal limbo in a Moscow airport transit area and facing uncertainty over whether any of the destinations he is said to be contemplating - Ecuador, Venezuela and Cuba - will let him in, Snowden seems to be at the mercy of geopolitical forces beyond his control.

Unseen in public since arriving in Moscow last weekend, much remains unclear about Snowden's overtures to various countries and how they have responded behind the scenes.

Russia may no longer have sufficient reason to continue harboring Snowden if, as is widely believed, its intelligence services have already questioned him about the classified documents that he has admitted to taking from the National Security Agency.

The leftist government of Ecuador, already sheltering WikiLeaks founder Julian Assange at its London embassy, is reviewing Snowden's asylum request, though officials have sent mixed signals, suggesting the process could drag on for weeks.

Venezuela's new president, Nicolas Maduro, has spoken favorably of granting refuge to Snowden but has taken no action, and he may think twice about risking a setback in tentative steps toward post-Chavez rapprochement with Washington.

And even if Ecuador or Venezuela decide to take Snowden, there is no guarantee that communist Cuba, the likely transit point for any flight from Moscow to those South American countries, would let him pass through and further complicate its own thorny relations with the United States.

Adding to Snowden's troubles, the Obama administration, embarrassed by his disclosures on U.S. surveillance programs and his ability to dodge extradition when he fled Hong Kong last Sunday, is bringing heavy pressure to bear on any country that might consider accepting him, diplomats say.

"Thus far, he has chosen his destinations carefully," said Carl Meacham, a foreign policy expert at the Center for Strategic and International Studies in Washington. "His time, even in those countries, however, may be running out."

Another potential complication is the role of anti-secrecy group WikiLeaks, whose alliance with Snowden further politicizes his case. British legal researcher Sarah Harrison, a top WikiLeaks lieutenant and Assange confidante, escorted Snowden on the flight from Hong Kong to Moscow and is believed to have remained with him.

FOCUS ON RUSSIA

Russia remains the chief focus of the diplomatic scramble, and while President Vladimir Putin has clearly delighted in the chance to tweak Washington, there are questions whether he wants a prolonged saga that threatens deeper damage to already-chilly U.S.-Russia relations.

The former NSA contractor's trek took him to Moscow because he had little choice of any other route that would keep him relatively safe from his American pursuers, former Russian intelligence officers and political and security analysts said.

"He has almost nowhere to go. He does not have much of a choice," said Fyodor Lukyanov, editor of the journal Russia in Global Affairs and a member of an influential foreign policy council.

"Considering that he came out with a serious statement that is seen by the United States as treasonous, he needs to lay out an itinerary through countries where he can feel more or less certain that he will not be handed over."

Despite Putin's insistence that Russian intelligence agencies had not been "working with" Snowden, a Russian security service source said they would certainly have interviewed him.

U.S. authorities are already operating on a "worst case" assumption that all of the classified material in Snowden's possession has made its way to one or more adversary intelligence services, U.S. national security sources said.

While top U.S. officials have warned of serious damage to national security interests from Snowden's leaks, Lukyanov suggested that in intelligence terms he was probably not a very valuable prize. "He is not some kind of special agent," he said.

Putin has built his return to the presidency on strident nationalism. If he hands Snowden back to the United States, he could face a backlash from Russians who see the American as a whistle-blowing hero.

"No matter what, we should not give him back. Let him go somewhere, or even stay in Russia - we are a big country and we have room for him as well as (French actor Gerard) Depardieu," said Viktor, a pensioner who was at Sheremetyevo airport on Friday for a vacation flight to Ukraine.

CONFUSION OVER ECUADOR

However, Snowden's protracted stay at the Moscow airport may have more to do with his problems reaching a deal with Ecuador than with any Russian desire to keep the American fugitive from moving on, the Russian security source said.

Ecuadorean President Rafael Correa has inserted his small Andean nation into the saga by offering asylum to Snowden, whom he has praised for exposing U.S. espionage efforts. However, he may also be trying to fill the void left by the death of Venezuelan socialist President Hugo Chavez - for a decade Washington's most vocal adversary in the region.

While Ecuador seems like Snowden's best bet as a place of refuge, its intentions are unclear.

Assange said earlier that Ecuadorean diplomats in London had issued a temporary travel document intended for Snowden, whose U.S. passport had been revoked. But the Quito government denied this.

In the meantime, Correa has said Ecuador cannot move forward with the asylum request until Snowden is in the country or makes his way to one of its embassies. Correa has indicated he is not planning to arrange transit for Snowden.

Returning to Quito on Friday from a tour of Asia, Ecuadorean Foreign Minister Ricardo Patino said his government had been involved in talks with the Russian government about Snowden's fate, but without any result.

For now, Venezuela also was not looking promising for Snowden. Maduro has made clear several times that he would take a positive view of an asylum request, though he said on Thursday that "no one has asked us for humanitarian refuge."

Since taking office in April, Maduro has at times used thunderous, Chavez-style, anti-U.S. rhetoric but he has also expressed interest in better relations with Washington.

Without help from a sympathetic government, Snowden's ability to travel is limited. The increasingly grim predicament may explain why his father on Friday said he is reasonably confident the 30-year-old Snowden would return if certain conditions were met.

Those conditions include not detaining Snowden before trial, not subjecting him to a gag order and letting him choose the location of his trial, according to a letter that Lonnie Snowden's lawyer, Bruce Fein, sent to U.S. Attorney General Eric Holder.