What BlackBerry Could Have Done

Jacob Harper |

BlackBerry Inc. (BBRY) nee Research In Motion is on its last legs, and could very well be dead before the end of the year. The company has lost $75 billion in value since hitting its apex in x, and has publically floundered in the face of the ascendance of smartphone competitors Samsung and Apple, Inc. (AAPL) . The company’s last-ditch effort to turn things around in 2013 with the launch of their own late-model smartphone, the Z10, has been an unmitigated disaster, and the company lost $965 million last quarter largely as a result of the Z10 tanking.

While private equity firm Fairfax Financial Holdings Ltd has offered to buy the company for $9 a share, or $4.7 billion, that deal is far from done. Fairfax still needs outside investors to jump on board, and with the market keeping BlackBerry around $8 a share, it looks like that probably won’t happen.

This says nothing of the fact that even if BlackBerry finds a buyer, be it Fairfax or another “white knight,” the chances of BlackBerry surviving as a complete entity are getting slimmer every day.

Without a buyer, the company is less than a year from completely running out of cash and going the way of the dodo. Or they will be gobbled up by a rival, either to live on as a vestigial subsidiary, or more likely mercy-killed, stripped, and sold off in parts. Either way, it doesn’t look good.

Seems like a perfect time to Monday morning-quarterback BlackBerry’s road to failure. Because the question now isn’t “Is BlackBerry a spectacular failure?” but “What can we learn from this spectacular failure?”

BlackBerry’s cardinal sin was failing to move nimbly in a fast-changing marketplace, and especially to capitalize on their strengths instead of trying to become Apple 2.0.

 Any one of these alternate strategies would have probably served the company better:

#1 They Could Have Kept the 10 the Same

While the market is unquestionably dominated by touchscreen smartphones, BlackBerry made a huge error in reasoning to try to ape that. Creating the Z10 from scratch was a huge undertaking, and took the company far longer to put out than originally anticipated.

But more than taking a long time to develop because of its radical differences, those differences alienated its users who were already used to BlackBerry’s physical keyboard. Moving to touchscreen, while ostensibly the wave of the future, actually served to be a detriment to BlackBerry fans who’d grown completely accustomed to the old setup.

#2 BlackBerry Could Have Just Focused on Messaging

BlackBerry’s messaging system is a bright spot in its otherwise sullied portfolio. Like most software, it has an insane profit margin in licensing, netting as much as 90 percent net. BlackBerry’s star software is its instant messaging service, which still has 60 million users.

However, the service was limited as BlackBerry sales dwindled. The messaging service, which had proved popular with corporate clients and in emerging markets, was not available on non-BlackBerry phones. Plans to begin licensing the service out were scuttled in one of the many intra-boardroom showdowns the company experienced in the last two years. The fight over the future of the messaging service eventually led to the split of the famed co-CEOs Jim Balsillie and Mike Lazaridis, who turned the company over to Thorsten Heins.

#3 They Could Have Embraced Being Old-School

To put it bluntly, BlackBerry isn’t cool. While they were once a staple of hip, with Barack Obama being its most notable early adopter, as Apple and Samsung rolled out more and more apps and killer software, BlackBerry lost out with cutting edge techies. The company transitioned into the go-to phone for corporations and governments, giant entities looking to supply cheap, functional smartphones to its employees. Which is fine – despite their loss of market share to Apple and Samsung, BlackBerry always didvery well at enterprise.

The Globe and Mail wrote “trying to satisfy its two sets of customers – consumers and corporate users – could leave the company satisfying neither.” And that’s exactly what happened. The company abandoned physical keyboards as being relics, upsetting its corporate customers who had grown used to them. They made halfhearted stabs at getting apps onto the BlackBerry to satisfy consumers. But the apps bewildered corporate clients, who didn’t understand why something the viewed as a tool for their employees needed unnecessary bells and whistles.

BlackBerry would have benefited most from picking one side or the other, and it’s clear which one they were finding more success with. The Department of Defense is a notable major buyer, and one with deep pockets who is willing to wait out a company while they retool. Consumers, on the other hand, don’t have the smear kind of patience, as BlackBerry is quickly learning.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
AAPL Apple Inc. 109.90 0.41 0.37 26,527,997
BBRY BlackBerry Limited 7.59 0.07 0.93 4,588,578
RGDFF Reunion Gold Corp Ord 0.04 0.00 0.00 0

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