Blackberry – Survival instinct

Reply to this post

Blackberry’s hardware days are numbered.

• In a week where all of Blackberry’s dirty laundry is laid bare in a new book, Blackberry is also moving to again reduce headcount in its handset business.
• Blackberry has attempted to play to its strengths by narrowing its hardware focus to financial institutions and governments but this does not seem to be working.
• In Q1 15A, Blackberry’s smartphone market share fell to just 0.3% (Counterpoint) which I think is very far from enough upon which to base a sustainable business.
• I think that the problem is that Blackberry has misunderstood why its remaining customers are still using its products.
• Blackberry is very secure but the others are catching up and critically, I think that iOS, Windows Phone and locked versions of Android are now good enough for every use case.
• Hence, I think that customers have not switched because they are very slow to implement change rather than Blackberry’s belief that they are choosing Blackberry for its security.
• Many financial instructions who once would never considered anything other than Blackberry, are now allowing employees to connect using their iOS, Android or Windows Phones.
• This is why Blackberry’s share is continuing to fall and why I think that its hardware business has no long term future.
• Blackberry’s response to this is to cut jobs, but it I think that the decline in hardware is structural and that Blackberry is experiencing the classic death by a thousand cuts.
• By the time the cuts are implemented, share will have fallen further necessitating further cuts and so on.
• While things are looking very bleak for hardware, I think that Blackberry does have a future with its BES enterprise mobility platform.
• Blackberry still has far more customers for BES than all of its rivals (except Microsoft) and there is scope for it to leverage this to generate a steady revenue stream.
• Unfortunately, I think that providing Digital Work services to mobile devices is a commoditising business and bigger rivals like Microsoft and VMWare (AirWatch) could easily give the service away as part of a much larger enterprise software sale.
• Consequently, I think that Blackberry can eke out a living here but it will be no or low growth and very low margin.
• It has a good installed base, but it must think of some way to make the BES service valuable again if it really wants to recover rather than just survive.
• Blackberry continues to be priced on hopes rather than the reality of its outlook and the dwindling value of its assets.
• Hence, there is plenty of scope for downside and I prefer Microsoft or Google.