BlackBerry’s success sours as vultures loom

BlackBerry’s success sours as vultures loom

The figures have been in decline for some time, but BlackBerry’s fate was sealed in August when it confirmed that it would consider a sale of the company. 

The announcement came just weeks before long-standing mobile manufacturer Nokia was bought by Microsoft. Doomed to suffer similar fates, Nokia and BlackBerry’s futures were etched in stone when the iPhone launched in 2007. Neither were able to match Apple’s innovation, and both started to see handset sales decline. Like Nokia, experts agree it’s unlikely BlackBerry can continue in its current form. The firm’s board has hinted at several outcomes. Without a sale, options include an expansion of its mobile device management (MDM) capabilities, or a pursuit of the M2M space through its BlackBerry 10 (BB10) platform. 

Yet none of these options will deliver the revenue growth needed to offset BlackBerry’s declining device revenues, making a sale look likely. ‘There’s no denying that BlackBerry’s numbers are down; the firm is smaller and less profitable than it once was,’ says Jan Dawson, chief telecoms analyst at Ovum. ‘Shipments are down, revenue is plummeting and profits have fallen.’ Ultimately, Dawson thinks a buyer could be an enterprise software company such as Oracle, or HP - which has already had several forays into mobile devices. He also suggests a handset vendor such as Samsung might have an interest in BlackBerry’s patents and enterprise expertise. 

The weakening of hardware

But BlackBerry’s hardware side looks doomed. During the 2013 financial year, 95% of BlackBerry’s expenditure was on hardware, while 5% was split between services and software. This is despite the fact that hardware made up less than 60% of BlackBerry’s total revenue, with the firm taking a substantial 40% from software and services. One of BlackBerry’s biggest mistakes was to focus on hardware; this is its weakest asset, says Malik Kamal-Saadi, principal analyst at Informa Telecoms and Media. Because of its weak hardware division, Kamal-Saadi thinks it is ‘extremely unlikely’ that BlackBerry will be able to sell its business as a whole. ‘A lot of people think Chinese companies like Lenovo or Huawei will be interested in the whole package, but problems could arise in the form of Canadian government validation and investor approval - this can take years to happen,’ he says. 

And if BlackBerry ends up siphoning off its assets separately, BB10 could be a very attractive proposition for vendors looking to peruse the M2M space. This is because the BB10 OS is based on QNX, which Kamal-Saadi says is ‘the greatest cross-platform in the market’ thanks to its granularity.

Kamal-Saadi thinks a sale of BB10 would attract a new entrant to the mobile market, such as Amazon or Yahoo. ‘Imagine when your phone will become the controller of your car, your fridge and your TV,’ he says. ‘You’ll need a cross platform. QNX could be adapted and that’s a huge strength for people that want to go to that next stage where the phone becomes the hub or remote control.’

Whatever happens, with BlackBerry about to report its second quarter results at the end of September, an announcement is expected very soon. ‘The board needs to sell as soon as possible,’ says Kamal-Saadi. ‘Every day loses value to shareholders and the business.’

But if one thing is certain, there is no coming back for BlackBerry. ‘It will never get back to the glory days; if it survives it will be in a different form,’ Dawson says. ‘But which asset will provide the revenue stream? Device revenues are dropping so if they don’t sell, it needs to find  a way of making money from something else.’

 

BB Email

 

BlackBerry should play on its strengths by licensing its email infrastructure to be sold as a separate app, according to Sami Mughal, hardware design engineer and founder of OxGadgets.

‘I would like to see their email infrastructure, probably as the BB HUB, appear as an app on the Android, WP8 and iOS platforms,’ Mughal says. 

Meanwhile, BlackBerry hardware might be better suited to an operating system such as Android or Ubuntu, he suggests. ‘BlackBerry already has a big following in the business world, and it can still carry on as email and browsing devices, but running a different OS.’

 

BBM's Fate

 

BlackBerry did have flashes of brilliance such as its BlackBerry Messenger Service (BBM). But in 2011, when the instant messaging service was used to communicate during the London riots, BlackBerry’s reputation arguably became tarnished. 

It was followed by several embarrassing outages, for which BlackBerry was forced to apologise. ‘BBM is one of the core parts of the firm – it became popular with teens in certain markets at least,’ Ovum’s Dawson says, adding that although the London riots created ‘brief PR problems, it’s been overblown’.

BlackBerry has recently added more enterprise-centric features to BBM, such as screen-sharing, video and voice calling, and its channels product for brands, signalling a possible survival for the tool in the business market.


 

Written by Mobile Today
Mobile Today

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