As soon as Prem Watsa stepped down from Blackberry's board in August, speculation that he would launch a bid for the troubled smartphone maker started to swirl. Six weeks later, the man some call Canada's Warren Buffett has delivered, beginning a rescue project he once said could take four or five years.
Just over a year ago, Watsa said BlackBerry was a "Canadian success story," a good buy and a likely turnaround story even though its market share was tumbling.
BlackBerry's fortunes have only deteriorated since then, with the latest blow coming on Friday, when Blackberry said it would cut more than a third of its workforce as it retreats from the consumer market in favor of its traditional strength serving businesses and governments.
But Watsa, chief executive of Fairfax Financial Holding, which is the top BlackBerry shareholder, is an old hand at looking wrong today and right tomorrow.
On Monday, BlackBerry said it agreed to be acquired by a consortium led by Fairfax for $4.7 billion, a move observers said could allow the company to put its house back in order out of the public eye.
Fairfax, both an insurance holding company and Watsa's investment vehicle, was on the losing end of bets against the market in the mid 2000s as Watsa waited for the US mortgage industry to collapse.
The company's stock fell by 50% between mid-2003 and mid-2006 as Watsa's purchases of credit default swaps flattened profits, while rivals feasted on a housing-fed bull market.
But when the market began to weaken in 2007, Fairfax began notching up investment gains, pulling in billion-dollar profits in 2007 and 2008. Then with markets still reeling and other investors licking their wounds, Watsa started to plow money back into equities, bringing another strong year in 2009.
Since their 2006 low of C$100, Fairfax's shares have more than quadrupled.
Indeed, Watsa had already shown his investment chops by selling stock ahead of the 1987 stock market crash and buying Japanese puts - or rights to sell stocks at guaranteed prices - ahead of the Tokyo market's collapse in 1990.
Watsa, born in 1950 in Hyderabad, India, and trained as a chemical engineer, has a public profile that has at times bordered on the reclusive since he took over Fairfax in 1985. For his first 15 years at the company, he barely spoke to a reporter, and he only started holding investor conference calls in 2001.
Fairfax has generally not been known as an activist investor, but Watsa has not shied away from a fight, launching a $6 billion lawsuit against a group of hedge funds in 2006, accusing them of conspiring to the drive the company's shares down so they could be shorted.
A short position enables an investor to profit when a stock drops.
To be sure, not all Watsa's moves have been golden. Fairfax had to write off most of its investment in Winnipeg-based media company Canwest in 2009 as the company filed for bankruptcy protection. It also wrote down a significant investment in publisher Torstar in 2008-09.
Speaking last year, Watsa suggested investors looking for a short-term rebound in BlackBerry might be disappointed.
"Is it going to turn around in three months, six months, nine months? No," he told reporters. "But if you're looking four, five years ... We make investments over four or five years."
Like billionaire Warren Buffett, an investor Watsa says he admires, Watsa preaches a long view that suggests it may be too early to assess his decision to buy into BlackBerry.
As it sits now, BlackBerry has not been a turnaround story under Watsa's watch. Since January 2012, a period when Fairfax has raised its stake in the company from a little more than 2% to just under 10%, BlackBerry's share price has slumped.
"Prem invests for the long term," Paul Holden, an analyst at CIBC World Markets who follows Fairfax, said earlier this year.
"He's held his major stake now for what I would say is a fairly short period of time relative to his investment horizon, so I would say it's probably too early to put any score on that investment."
Watsa stepped down from the BlackBerry board of directors in August, citing a potential conflict of interest, as the company said it was exploring the sale of itself and other options.
'Canada's Warren Buffett'
Watsa, referred to as the “Canadian Warren Buffett,” has modelled his investment approach after the American billionaire who founded Berkshire Hathaway Inc. by investing the assets of insurance subsidiaries to create wealth. He pursues Buffett’s strategy of investing in the assets of down-and-out stocks.
Watsa has been a vocal advocate of the notion that BlackBerry can turn around its fortunes. He was named as a director of the Waterloo, Ont. company as part of a management shakeup that saw former co-CEOs Jim Balsillie and Mike Lazaridis ousted. His company, Fairfax Financial Holdings, was the BlackBerry’s third-largest investor before bidding for the entire company.
From India To Canada
The 63-year-old was born in India and earned a degree in chemical engineering from the Indian Institute of Technology. He also has an MBA from Western University’s Richard Ivey School of Business.
A 'Modest' Income
Compared to other billionaires, Watsa earns a relatively modest salary from his company. He was number 102 on the Globe and Mail’s list of top Canadian earners, earning $622,000 in total compensation in 2012.
Prophet Of Bad News
Watsa is credited with predicting the downfall of the U.S banks tied to the mortgage market south of the border. He has also warned that Canada’s housing markets are overvalued and some are suffering from overbuilding.
- Agencies (Edited by Viji Alles)BLOG COMMENTS POWERED BY DISQUS