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

It keeps getting more and more grim for BlackBerry.

The embattled smartphone manufacturer on Monday disclosed that the deal to take the company private was dead, and that it would instead seek $1 billion in convertible debt financing. BlackBerry CEO Thorsten Heins, meanwhile, will 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 the company 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 burrow in. Chen's background in software is an indication of where the company wants to go.

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 join in its proposed $4.7 billion deal, which it is now clear was made without any foundation, only speaks to the tenuous reputation BlackBerry has with investors. With reports that BlackBerry was seeking deals with companies as out there as Facebook, it's likely that it looked long and hard for an acquirer.

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

That was never more evident than in the company's fiscal second-quarter results, which showed a loss of nearly $1 billion -- largely due to the write-down of unsold BlackBerry Z10 smartphones -- and cut 4,500 jobs.

That led to the FairFax offer and a raft of rumors about possible suitors, possibly including 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 alternatives 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.

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 to focus on putting out good products, arguing that customers tend not to pay attention to the financial state of their mobile device provider.

But BlackBerry is in a different situation. Because it handles sensitive information with large businesses and government clients, its customers are likely heavily scrutinizing the company's situation. Those 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 have to be disconcerting to potential customers.

"Though it's achieved some traction with enterprises upgrading their BlackBerry servers, it has failed to sell many BlackBerry 10 devices, and this looks unlikely to change," said Ovum analyst Jaw Dawson. "This ultimately harms the unique selling point of BlackBerry server products leaving the door open to replacement by rivals that are better able to support the more popular Apple and Android devices."

Gaining the confidence of business customers is 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?