Cutting Room: BlackBerry accelerates back to the past

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BlackBerry reported losses of $4.4bn and sold just 1.9 million smartphones – the majority of which ran BlackBerry 7. Paul Withers argues BlackBerry 10 has been a failure and the only way the business can survive is if it concentrates solely on services 

BlackBerry said in our predictions piece last year that 2013 was the most significant period in its history. It was, but for all the wrong reasons.

The launch of the BlackBerry 10 platform was supposed to give the company the kick up the backside it needed to get back on track. Analysts classed the OS as “make or break” for the company.

However, BB10 has seen the company accelerate backwards, leaving its future more in question than ever before.

The writing was on the wall halfway through last year, when it made a loss of $84 million for the three months to June 1. This compared to a $94 million profit in the previous quarter. Losses rocketed to £599 million in the next quarter. Analysts warned this was the beginning of the end.

It was dealt a further blow when Fairfax Financial Holdings pulled out of a deal to buy the company for $4.7 billion, instead deciding to invest $1 billion.

BlackBerry was in turmoil. Former Sybase CEO John Chen replaced BlackBerry CEO Thorsten Heins. Several experienced senior execs have left, including COO Kristian Tear and CMO Frank Boulben. It then reported a loss of $4.4 billion for the three months to November 30.

BlackBerry 10 has been a failure. The manufacturer twice delayed the launch of BB10 in 2012 so it should have been ripe for an assault on the smartphone market. BlackBerry only released half of the six BB10 devices it said it would last year, suggesting it knew it was in trouble early on.

You have to wonder if the millions if not billions of dollars spent on getting BB10 ready was all worth it? BlackBerry has paid the price and lost ground.

Nokia held onto Symbian for too long but signed up with Microsoft to use its Windows Phone OS and after a slow start, it hasn’t looked back.

According to OS sales figures from research firm Kantar for the three months to November 30, Windows Phone share more than doubled to 10.8 per cent in the UK. When you consider BlackBerry’s share is just over a third of what it was a year ago at 2.4 per cent, you can see who the winner is.

BlackBerry has also made a mistake in not releasing handsets across more price segments. It has so far chosen to mostly compete in the high end space. The Z10 and Q10 were initially pitched here but going up against Samsung and Apple was always going to end in failure.

It would have been better off spreading itself more evenly, targeting the low to mid-end of the market. Big corporations are looking for reasonably priced devices to deploy to tens of thousands of employees and can’t afford to buy a sack load of high-end BlackBerrys to do this. They have moved to manufacturers such as Nokia and using its Lumia smartphone portfolio.

The tricky question is where it goes from here. If it continues with its devices division, releasing a limited number of handsets that fail to meet expectations, it will continue backwards.

Using Android or Windows Phone on its smartphones is not the answer. If it was going to do this, it should have done this a couple of years ago when both operating systems were in their infancy.

There are also too many established players for BlackBerry to compete with on both platforms. The likes of Samsung, Sony Mobile, HTC and LG have established themselves on Android, while Nokia has made Windows Phone its own.

A better option would be to ditch the devices business and focus on services. As shown in the financial results, 53 per cent of BlackBerry’s revenues for Q3 came from services (BBM and BlackBerry email) while only 40 per cent came from devices.

This is where its survival lies. BlackBerry Enterprise Server 10 (BES10) appears to be flourishing. BlackBerry now has over 30,000 commercial and test servers installed to date, up from 25,000 in the previous quarter. It has amassed a global enterprise customer base of 80,000 clients.

BlackBerry Messenger (BBM) is still a strong brand. It was made available to Android and iOS on October 22 and by November 30 had already clocked up more than 40 million registered users. It also revealed more than a dozen OEMs have preloaded it.

They could also adapt their email service to work on other platforms. If business users believed the email service they were receiving from BlackBerry was better than that from Gmail or Outlook, then they may be prepared to buy an application just to have email. This again creates a new revenue stream.

The only worrying factor is Chen’s apparent confidence there is a still a future for the devices business. If he is not convinced otherwise, we may be sitting here in 12 months time talking about BlackBerry in the past tense.

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