BlackBerry Ltd. is abandoning a plan to find a buyer and will instead raise $1-billion of new funds and replace its chief executive and some directors, sources said.

The Waterloo, Ont.-based smartphone company had spent the past two and a half months seeking a buyer, and had received a letter of intent from investor Fairfax Financial Holdings Ltd. to purchase the company for $4.7-billion. Fairfax had until today to complete its detailed examination of BlackBerry’s books.

The new plan will involve raising roughly $1-billion by selling convertible notes to a group of investors, according to people familiar with the transaction. Chief executive officer Thorsten Heins will depart the company, and the company will announce changes to its board, the people said.

John Chen, the former chief of Sybase Inc., will be appointed executive chairman of the board, responsible for the company's "strategic direction, strategic relationships and organizational goals."

He will be interim CEO when Mr. Heins leaves.

Mr. Heins was named to the top job early last year, taking over from Mike Lazaridis and Jim Balsillie, who had run the company since its earliest days.

Mr. Heins’ short tenure was marked by the rocky launch of BlackBerry’s new phone lineup. The new phones met tepid demand, and BlackBerry made the decision to officially put itself up for sale in August.

Fairfax had offered $9 a share in its tentative letter of intent, and was working to pull together a group of backers. The market was skeptical that Fairfax would be successful, and BlackBerry shares have been trading well below that price.

The process also attracted interest from various sources, including a potential group bid from private-equity firm Cerberus Capital Management, Mr. Lazaridis and chipmaker Qualcomm Inc.