BlackBerry: Never say die

The notion of “innovate or die” must have a special meaning to BB, who has struggled for its survival for several years now – from an enviable position as the world’s coolest and most tech savvy phone company five to seven years ago, to a company with barely 1% of the smartphone business today. In […]

The notion of “innovate or die” must have a special meaning to BB, who has struggled for its survival for several years now – from an enviable position as the world’s coolest and most tech savvy phone company five to seven years ago, to a company with barely 1% of the smartphone business today. In BB’s archives of tech innovations can be found the best QWERTY smartphone keyboards, the first company to introduce wireless e-mail to cell phones, the superbly popular BBM (BlackBerry Messenger), and the reputation as the alpha and omega of smartphone security. The latter feature (security) makes BB’s phones the choice for government workers, business people, and the healthcare industry. Unfortunately, these attributes have not saved BB from near death.
Apparently, Passport didn’t do the trick for BB, making Classic the new hope. Unfortunately, because the only significant feature of Classic is perhaps the restoration of BB’s classic keyboard, the new phone isn’t going to do the trick either. As they say, “just too much water has passed under the bridge.”
BlackBerry unveiled its high-end smartphone, Passport, on 24 September 2014, which BB’s CEO Mr. John S. Chen, felt would turn the company around. But revenues are still meager by peer standards, and last quarter still recorded a big loss relative to revenue. (Revenue fell 34% last quarter.) Although profits might be up significantly, they are doing so on meager revenue, a result of severe cost-cutting moves. Any business person knows that long-lasting profitability comes from significant revenue increase, not from deep cost-cutting. Since the marketplace isn’t just accepting BB’s now-archaic product offerings, when compared to products from the likes of Apple and Samsung, Mr. Chen has a lot of work cut out for him. However, hope seems to be quite alive in what remains as BlackBerry, making Mr. Chen appear like a miracle worker bent on raising BB from the grave. Passport didn’t do the trick and, unfortunately, neither will Classic.
Let’s try to retrace BlackBerry’s road from riches to rags. The first sign of the company’s vulnerability came in the outage of October 2011, which resulted in a three-day shutdown of email and the Blackberry Messenger (BBM). Another slip was the company’s decision to not enter the smartphone market early, even though the company’s pioneering wireless e-mail-enabled handsets seemed to have prepared the way for the introduction of smartphones.
Launching the Z10 smartphone (in March 2013) came too late, with too little to offer – it wasn’t well differentiated or much cheaper compared to the top-shelf devices (from Samsung and Apple). Thus, consumers do not have enough reasons to switch to Z10. Perhaps more disturbing is the evaluation of BB’s Q10 device, which is a sequel to Z10. According to Ian Austen in the 10 July 2013 issue of New York Times, “some buyers of the Q10, a model that includes BlackBerry’s signature keyboard, have said they were disappointed to discover that it initially could not synchronize calendar and contact information with corporate systems that use Microsoft Outlook. Others discovered mail syncing issues that they had not had with previous BlackBerries. And although BlackBerry continues to expand the apps offered for the phone, many important ones are missing, and assessments of their overall quality are mixed.”  Austen alluded to an event, whereby a BB shareholder was so disappointed with Q10 that he sold his BB share at a loss! As mentioned above, Passport, launched September 2014 hasn’t worked out for BB either. BlackBerry’s stock price sometime last week was approximately $9.65 a share; compared to $60 in February of 2011.
BlackBerry has really been very sick and its eventual demise was imminent at some point late last year. In September 2013 the company wrote-off nearly $1 billion in unsold inventory of its then new line of smartphones, including the touch-screen Z10 model. There were steady layoffs, including 4,500 in September 2013. Frustrated and despondent, BlackBerry put itself out for sale after all efforts to hold on failed. There were joint bids for BB, such as that by the two BB’s co-founders, partnering with Cerberus Capital Management and Qualcomm Inc., a mobile-phone chip maker. The Chinese company Lenovo even showed some interest in acquiring BB. BlackBerry’s efforts to find a buyer failed late last year, and a tentative $4.7 billion plan to take the company private went bust. So the company decided late last year to restructure and remain public.
As this column has often surmised, BB will never come back to the position it once held as the world’s number one cell phone company. While the company may not die off totally, it could remain a marginal player in the midst of all these vicious “animals” (Apple, Samsung, Xiaomi and the gang from China). This assessment holds in spite of Passport, a high-end phone that targets business customers (and much more so for Classic, which reviewers have found to be quite light on features). Many U.S. government departments have replaced BB with phones from Apple and Samsung as their secure phone, perhaps because the company has not been doing well for many years now. Also, I am aware of a major U.S. defense contractor that has replaced BB with Nokai running Windows Mobile.
The take away from this article is that BlackBerry has again launched another smartphone, Classic, which does not appear to have any real differentiating features, and will therefore probably belong in the archives of “also-launched” smartphones.