Blackberry Says to Explore Strategic Alternatives

BlackBerry, which pioneered mobile email with its first smartphones and email pagers, said on Monday it had set up a committee to review its options, sparking a debate over whether Canada's one-time crown jewel is more valuable as a whole or snapped up piece by piece by competitors or private investors.

The company said Prem Watsa, whose Fairfax Financial Holdings Ltd is BlackBerry's biggest shareholder, was leaving the board as BlackBerry determines its next steps.

Canada's Globe and Mail newspaper said Fairfax was talking to industry and private equity players about possibility taking BlackBerry private. Fairfax did not respond to requests for comment.

Other potential buyers of BlackBerry assets, if not the company itself, could include deep-pocketed Canadian pension funds, as well as some of its rivals.

BlackBerry, once a stock market darling, has bled market share to Apple Inc and phones using Google Inc's Android operating system, and its new BlackBerry 10 smartphones have failed to gain traction with consumers.

BlackBerry shares rose more than 10 percent to $10.78 in New York and C$11.13 in Toronto in afternoon trading. But the shares remain well below their levels in June, before the company reported dismal results that included poor sales of the BlackBerry 10 that it viewed as key to a turnaround.

The share price peaked at about C$150 in June 2008, when BlackBerry, then known as Research In Motion, had a market capitalization of more than $80 billion.

BlackBerry's assets include a shrinking, yet well-regarded services business that powers its security-focused messaging system, worth $3 billion to $4.5 billion; a collection of patents that could be worth $2 billion to $3 billion; and $3.1 billion in cash and investments, according to analysts.

Even at a conservative estimate, that is more than the company's $5.4 billion market capitalization, although analysts say the smartphones that bear its name have little or no value and it might cost $2 billion to shut the unit that makes them.

BlackBerry's fate is likely to involve the Canadian government, which vets foreign takeovers of domestic companies. The government said it would not comment on speculation, but a spokesman for Industry Minister James Moore said the government wished BlackBerry well in its search for new options.

Companies tipped as possible partners for BlackBerry have included Microsoft Corp and Amazon.com Inc, as well as Lenovo Group Ltd, where a senior executive said earlier this year the Chinese computer maker would consider a bid for BlackBerry to boost its own mobile business.

But Chinese involvement would trigger deep concerns about security issues from the Canadian government.

Sources say Wall Street bankers have also pitched deals involving BlackBerry to companies such as HTC Corp and Samsung Electronics Co Ltd, so far without success.

Watsa said Fairfax has "no current intention" to sell its BlackBerry shares - some 10 percent of the company. But if he remained on the board of directors, he would have a conflict of interest if he wanted to be part of a play for BlackBerry.

"I continue to be a strong supporter of the company, the board and management as they move forward during this process," he said in a statement.

Analysts expressed scepticism about the new committee, noting that BlackBerry announced a review more than a year ago when it hired JPMorgan and RBC as financial advisers. A source said both are still involved in the current strategic review.

"While a change in structure could result in a higher stock price in the near term, we do not envision any changes that would help BlackBerry reverse the significant smartphone share loss or rapid decline in service revenues," said Tim Long, analyst at BMO Capital Markets.

BREATHING ROOM

You're the Boss Blog: Finding Alternatives to Building a Web Site

Generating revenue along with the buzz.

Over my last two columns, I’ve discussed how not to hire a Web developer and how to build a Website you love. But for some small businesses, there are other options — alternatives to building or refreshing a Web site.

One option is a one-page site. This is a specialty of Carbonsquare, a design shop that builds business sites of up to 10 pages using customized templates on the Weebly platform. One of Carbonsquare’s clients is a fashion-accessories retailer, Debra Wood, who has a mobile fashion boutique, DebiFashion. Ms. Wood decided a one-page site worked best for her side business. “It was so much work to constantly change my shopping-cart Web site, so for a $249 investment, I can make the changes I want and not break the bank,” she said.

For a basic 10-page site, Carbonsquare charges $549 plus a monthly hosting and maintenance fee that runs about $30. “We decided to use the Weebly system because it’s a simple drag-and-drop system,” said Christopher Rippie, founder of Carbonsquare. “We want to help our customers understand smart design. Too many people over-design their Web sites. We did not use the WordPress platform, because it takes more time to build a Web site, which drives the cost up. We are trying to eliminate the sticker shock in Web site design and give people something they can manage themselves after we build it.”

Carbonsquare does have some drawbacks. WordPress plug-ins won’t work with the Weebly platform, search-engine optimization functionality is not built in the way it is with WordPress, and if you are blogging heavily, the system has limitations. Mr. Rippie suggests building a blog in WordPress and integrating it with the Weebly Web site.

Another option is to use Tumblr, a very easy-to-use blogging platform, as your Web site. With more than 100 million bloggers, Tumblr has an active community of users who search for content based on keyword tags. This can make it easier to build an audience quickly. It allows users to post text, photos, quotes, links, music and videos from a desktop or phone and from a  browser or through e-mail. A Tumblr page works best for visual businesses, such as retail, design, food, or fashion. Some small businesses use Tumblr in addition to a WordPress blog. Tumblr allows owners to link back to e-commerce sites with coupon codes, QR codes and links to other social media accounts. Its templates are easy to use and there’s nothing to download to get started.

Diane Souter of Absolutely Fabulous Unique Gifts and Décor in Huntington Beach, Calif., uses a Tumblr page to highlight her latest products and attract a younger audience. “Tumblr is so easy to do that I could do it,” she said. “I’m able to take a photo with my iPhone and upload it to Tumblr with the hashtags and keywords, within seconds literally, and it links to my Web site.”

Ms. Souter said that while the traffic from Tumblr leads to some sales, it mainly drives buzz. “It would be great if people could click on the picture and the price comes up with the ability to make a purchase through Tumblr,” she said. That might be a way Yahoo will attempt to monetize the site, now that it has bought it for more than $1 billion.

Three months ago, Innate Family Chiropractic, based in Pasadena, Calif., started using RebelMouse to host its Web site. RebelMouse allows companies to display the latest updates on their social media accounts on the company home page; in fact, those updates can be the homepage or they can an embedded addition. Users can customize a RebelMouse site or choose from previously designed theme pages. They can also post a full-text blog post directly to RebelMouse and then add an image or a video. And they can add RSS feeds from their own blog or from other blogs they read frequently.

Paul Berry, former chief technology officer of Huffington Post, says he created RebelMouse to save small-business owners time and frustration. “We just so saw so many people struggle with their Web site almost to the point of giving up,” he said. “We knew there was a simple solution that didn’t involve developers or designers. We wanted to make people’s content shine and amplify their social media efforts.” The service costs $10 a month and integrates seamlessly with MailChimp, the e-mail service.

Innate Family Chiropractic picked RebelMouse to save time with its Web marketing and because it wanted a central place to share content on pediatric chiropractic care. The three-year-old family wellness and chiropractic center uses Twitter, Facebook, YouTube, Instagram, and Pinterest to share and generate health-related tips and articles. “I used to spend so much time educating clients and putting our content on all our social media accounts,” said Christopher Vargas, a chiropractor and owner of Innate Family. “Plugging everything into RebelMouse just made things easier.” The company pays $19.99 a month to use the service on two Web sites.

Melinda Emerson is founder and chief executive of Quintessence Multimedia, a social media strategy and content development company. You can follow her on Twitter.

This post has been revised to reflect the following correction:

Correction: June 7, 2013

A previous version of this post referred incorrectly to the Web platform Weebly.

DealBook: Despite Its Problems, Dodd-Frank Is Better Than the Alternatives

Harry Campbell

Repeal Dodd-Frank? It sounds so simple. But repealing the Dodd-Frank Act won’t end “too big to fail” banks, and it may even make things worse.

Mitt Romney raised the issue at the first presidential debate, contending that Dodd-Frank should be repealed and replaced because “it designates a number of banks as too big to fail, and they’re effectively guaranteed by the federal government. This is the biggest kiss that’s been given to — to New York banks I’ve ever seen.”

It’s a seductive idea. Dodd-Frank contains provisions that go much further than regulating banks in order to prevent another financial crisis.

In Section 1,502, to take one example, is a provision requiring public companies to disclose whether they use conflict minerals. What this has to do with the financial crisis is beyond me. So, some parts of Dodd-Frank may already need renovation or even repeal.

But the core of the law dealing with the big banks is another story. Simply repealing Dodd-Frank wholesale will turn back the financial clock to 2006 for these banks. That doesn’t seem very smart given what happened, something that Mr. Romney recognizes when he talks of replacing the act rather than repealing it.

The problem is that possible replacements are unlikely to work or to be politically feasible.

The fundamental issue is that a few banks have grown to be enormous over the last two decades. According to SNL Financial, four banks each had more than a trillion dollars in assets at the beginning of the year. JPMorgan Chase was the largest with $2.3 trillion in assets, while Bank of America had about $2.2 trillion in assets and Citigroup, $1.9 trillion. Goldman Sachs is fourth with about $950 billion in assets.

That’s a lot of money, but not only are the banks big, their share of the market has grown. In the 1980s, the 10 largest banks had less than 30 percent of bank depositary assets. By 2012, this amount had almost doubled to 54 percent.

And size has paid off for these select banking giants. They enjoy a subsidy of reduced borrowing costs because investors believe the government will bail them out if things go awry. The size of the subsidy is debated heatedly by economists, but one recent study estimates that before the financial crisis, the banking behemoths obtained a subsidy that made their financing cheaper by 45 basis points, 0.45 percent. And at least one study has found that banks overpaid in the years leading up to the financial crisis to acquire competitors in order to get bigger and gain this advantage.

So, Dodd-Frank didn’t create “too big to fail” institutions. The banks themselves did because it made them money.

The financial reform law takes two tacks in dealing with these institutions. First, Dodd-Frank tries to figure out who they are and charge them for being too big. This is done by raising their regulatory costs through more oversight and supervision.

It means more governmental red tape for these banks, but also ostensibly fewer problems because of it. Regardless, one purpose of this increased regulation is to impose a regulatory tax on big banks to push them to be smaller.

Second, Dodd-Frank addresses the “Lehman” problem — that bankruptcy may not work for a huge financial failure. Instead, a new regime is created to put big institutions into what is hoped to be an orderly receivership that avoids a general financial panic, something that unfortunately happened when Lehman Brothers filed for bankruptcy in September 2008.

Repealing Dodd-Frank will not make these banks go poof and disappear. Instead the banks, which have only grown larger and more concentrated since the financial crisis, will continue to enjoy a subsidy. After all, when push comes to shove, no president will simply let a $2 trillion institution go down. It would destroy the economy.

The real question then is whether there are any alternatives to Dodd-Frank other than repealing it.

The two options that are most often discussed are to break up the banks or impose a capital charge.

A breakup is the favorite choice of many and has even been mooted by Sanford I. Weill in July, a number of years after he left Citigroup, the behemoth he created. Daniel K. Tarullo, a Federal Reserve governor, recently proposed a simple suggestion: capping the size of a bank’s balance sheet. But in a large financial system, you need large banks as lenders.

Even if you can function without large banks, the political feasibility of a bank breakup in a Democratic administration, let alone Republican one, is unlikely.

Luigi Zingales writes in his provocative book “A Capitalism for the People” (Basic Books) that the Glass-Steagall Act, the Depression-era law that separated investment banking from commercial banking, was good because it led to competition among banks rather than allowing them to bond together to fight for their bigness.

In other words, the big banks would now resist such a solution to the death. (Mr. Zingales, by the way, is a member of the University of Chicago faculty and has been a co-author with Glenn Hubbard, a central Romney economic adviser.) Like it or not, we are probably stuck with large banks. And there will always be smaller institutions that are simply too interconnected to be allowed to fail.

This leaves the second option and probably the one that Mr. Romney is likely to favor: higher capital requirements or leverage limitations for the biggest banks. This may work but essentially does the same thing that Dodd-Frank claims to do — make it more costly to be a “too big to fail” bank.

This solution has the virtue of being easier to administer and certainly requires less regulatory power. But the solution would leave a future administration gasping if one of these banks went down.

And the capital charges would have to be agreed on internationally in order to keep American banks from being outgunned by foreign competitors. This is what the Basel III accords are supposed to do, but raising the capital or leverage limits would require a whole new international bargain.

This is unlikely to happen anytime soon because the European banks lack the wherewithal right now to raise their capital even if they wanted to. Even more problematic is that raising capital and leverage requirements may reduce lending more than the current regulatory provisions do because banks would be forced to keep more money on their books rather than lend it.

The bottom line is that there are real problems with Dodd-Frank. It contains tons of extraneous stuff, and even the provisions dealing with the large banks are sometimes too convoluted and intricate. The mess that the regulatory agencies are in as they try to sort out the Volcker Rule is a good example.

But while it is nice to talk of repealing or watering down Dodd-Frank, the alternatives may not be much better as long as we have big banks. And those don’t seem to be going away any time soon.

Bits Blog: Japanese Look for Alternatives to Apple's Maps

Kimimasa Mayama/European Pressphoto Agency Tokyo’s maze of buildings.

In the wake of the problems Apple’s new iPhone apps are causing Japanese, smartphone users are flocking to another map app, from Navitime. The Tokyo start-up scoffs at Google Maps when it comes to mapping journeys through the streets of Tokyo that confuse even native Tokyoites.

Google had done a better job than Apple in mapping Japan, incorporating various data sources and putting its software engineers to work to tailor its map app to meet local needs and tastes. But with Google’s maps no longer easily accessible from the newest iPhones, the past few days have given Japanese map companies a chance to show their stuff.

Navitime, a pioneer in online map navigation here, claims to provide a “total navigation” service on every available transportation medium, and the service largely lives up to its name.

On the Navitime app, a search for train directions between two locations in Tokyo not only brings up timetables and routes on foot; the app also suggests which train cars to board to avoid crowds and get to the correct exits quickly.

A crowdsourced function, meanwhile, gives a real-time analysis of congestion on Tokyo’s notoriously crowded subway lines, from Level 1 (seats available) to Level 5 (packed in, can’t move) to the dreaded Level 6 (impossible to board the train at all).

And for those who give up on Tokyo’s trains, Navitime provides maps tailored for cyclists, who can select routes that have fewer uphill routes or go mainly along big roads, for cyclists who like to go fast. Or users can opt for routes that stick to narrower backstreets for a quieter ride.

“It’s the attention to on-the-ground detail that counts,” said Keisuke Onishi, Navitime’s chief executive, who founded the mapping service in 1997 after studying mapping algorithms in college in the 1980s.

Mr. Onishi now leads a 400-person company that sends out teams to physically check and update routes and estimated times.

“You just can’t work off existing data. You have to go out and get live information,” Mr. Onishi said, “or people are going to get lost.”