Device vendor Blackberry has announced that Canadian investment firm Fairfax Financial Holdings will, in partnership with other institutional investors, make a US$1bn investment in the firm. CEO Thorsten Heins will leave the firm as part of the deal.

Fairfax already holds ten per cent of Blackberry and made a $4.7bn bid to buy the vendor outright in September this year. It was reported by Reuters late in October that Fairfax was unable to raise the funding for a full takeover and, under the new deal, it will contribute $250m of the total $1bn investment.

Upon the closing of the transaction, expected within a fortnight, Thorsten Heins will step down as CEO. Former CEO of enterprise mobility software provider Sybase, John S. Chen, will be installed as interim CEO while the search for a permanent replacement is carried out.

Chen will also be appointed executive chair of BlackBerry’s board of directors. According to Blackberry, in this role, Chen will be responsible for the strategic direction, strategic relationships and organisational goals of BlackBerry.

Prem Watsa, chairman and CEO of Fairfax, will be appointed lead director and chair of the compensation, nomination and governance committee and Heins and David Kerr intend to resign from the Board at closing.

“There were rumours Fairfax would have trouble raising the money for a full buyout and this seems to be confirmation of that.” said Jan Dawson, chief telecoms analyst at Ovum. “They were able to get enough funding to make this much smaller investment though, so this looks like a plan B.”

Dawson added that this deal buys Blackberry time, which it needs to reverse its fortunes. However, the size of the investment means it will not buy a lot of time, he said. “It’s useful for keeping the company  going, but all the major metrics are going in the wrong direction so it’s a question of how quickly can they turn things around?”

Dawson added that, although Fairfax announced that it wanted to acquire Blackberry, it gave no indication of its intentions or planned strategy. “If it was taking Blackberry private there is no obligation to share such information, but it is still a public company under this scenario, so they have a duty to explain what they are going to do that is dramatically different from the previous management to turn the company around. If you’re an investor in Blackberry you’re still wondering if anything will change.”

Dawson added that the departure of Heins appeared inevitable, as he has not been extensively quoted in Blackberry’s communications over the past several months, making it appear as though Fairfax had made his departure a condition of the deal from the outset.

He also noted that Chen’s roots at a software firm suggest that Fairfax sees the future of the company as a software firm, which Dawson said is a sensible move. However, the margins in the software business are thin and Blackberry will have to find ways to ramp up its revenue in order to counteract the decline in device sales, he added.

Barbara Stymiest, chair of BlackBerry’s Board, said the deal represents a “significant vote of confidence” in BlackBerry and its future by investors.

“The BlackBerry Board conducted a thorough review of strategic alternatives and pursued the course of action that it concluded is in the best interests of BlackBerry and its constituents, including its shareholders. This financing provides an immediate cash injection on terms favourable to BlackBerry, enhancing our substantial cash position. Some of the most important customers in the world rely on BlackBerry and we are implementing the changes necessary to strengthen the company and ensure we remain a strong and innovative partner for their needs.”

Stymiest added her thanks to Heins for his six years of service to BlackBerry, noting that under his leadership, BlackBerry established a more efficient cost structure, developed new products, saw the adoption of BES 10 and delivered the BlackBerry 10 platform.  She also welcomed Chen on boad, hailing him as “a distinguished and proven leader in the technology industry”.

“Fairfax is a long-time supporter, investor and partner to BlackBerry and, with this investment, reinforces its deep commitment to the future success of this company,” said Fairfax’s Watsa.  “I look forward to rejoining the BlackBerry Board and to working with the other directors and management team, under John Chen’s leadership, to shape the next stage of BlackBerry’s strategy and growth.”