Where Does Blackberry Stock Go From Here?

  • Blackberry's fall from grace has been swift and at times unbelievable.
  • Innovation in the past few years has been lackluster.
  • Blackberry needs to clarify the unique selling point of their devices.

Back in July 2007, it would have taken a very pessimistic analyst to predict that Blackberry stock price could fall from $230.52 to $7.70 in the space of 8 years. In fact, such an analyst would have been viewed as insane, BlackBerry (NASDAQ:BBRY) (then called RIM) was THE hot stock; a company to lead humanity into the smartphone revolution. Holding a Blackberry handset was a statement of having achieved success. They were expensive but also triggered desire in the hearts of consumers. This was a perfect storm which drove sales.

Blackberry Stock Returns In Last 5 Years
BBRY stock chart

Source:Blackberry Stock Price Data by amigobulls.com

Blackberry failed to innovate quickly after the launch of the first iPhone. Therefore, as the iPhone gained in popularity, Blackberry's sales plummeted.

Fast forward to today, and Blackberry is a company on life-support. For instance, revenue has decreased by an average of 44.3% over the past 3 years alone. Additionally, the revenue streams and operating cash flow for this company look dire. To put that quantitatively, Blackberry had revenue of $20bn in 2011. In 2013, this had reduced to $3.3bn.

Arguably, this long and painful 'coma' could have easily been avoided.

Here is how:

1) When the iPhone began to eat up market share, Blackberry should have released a similar device. It may not have had the same functionality and ease-of use as the iPhone; however, it will have helped them to 'stand their ground'. Unfortunately, they didn't and continued to believe that their qwerty keyboard implementation is a big enough reason for people to desire their device.

2) Android should have been implemented in all new Blackberry devices from 2009 onwards. Why? Well, Google (NASDAQ:GOOG) (NASDAQ:GOOGL) was working hard to implement it into as many smartphones as possible. It was inevitable that it was going to become one of the main operating systems of choice. Blackberry remained stubborn in the belief that they had a superior mobile OS.

3) Blackberry failed to establish a strong unique selling point for their devices. However, as the rise of social media has shown, consumers aren't that bothered about data privacy as Blackberry though. Understandably, this is very important in the business, and governmental world; however, this is a small customer base compared to the mainstream.

When trying to gain market share from companies such as Apple (NASDAQ:AAPL) and Samsung, Blackberry should have released more mainstream devices.

4) One of their biggest mistakes was in launching a range of low-budget phones such as the Blackberry 8520. This decreased the allure of owning a Blackberry handset. That was the catalyst of Blackberry losing their ultra-premium handset tag.

5) There is no clear reason why someone should own a Blackberry device over let's say, an iPhone. Blackberry apps are updated less often and are fewer in number than those on iOS and Android. Until they can clearly define why the everyday consumer should yearn for one their device, they will always struggle in the marketplace.

Is there light at the end of the tunnel?

To Blackberry's credit, they haven't been completely dormant in terms of innovation. For instance, the Blackberry passport was released in September of 2014 to little fun fare. As is the trend with Blackberry, they stuck to their roots and released a phone for the entrepreneur or government worker. As a result, it can be argued that the Blackberry passport traded looks for functionality. With an iPhone 6 in one hand and the passport in the other, it is akin to the beauty comparison of Cinderella standing next to one of her stepsisters. And in this day-and-age, appearances are everything.

The business person 'gets' the Blackberry Passport, but does everyone else? I am sorry, but Blackberry CEO can't claim to want to gain market share from Apple and Samsung, but then create devices clearly aimed at a niche target market.

More recently, Blackberry announced the Blackberry Priv, an android-running smartphone with a stunning screen and a slide out Qwerty keyboard. With top of the line features, it is hoped that it can take the game to Apple and Samsung. It has also been suggested that this is Blackberry's last throw of the dice, as in it will stop releasing smartphones if sales of the Priv are below targets.

The issue is that at a cost of $699, it is priced to compete directly with the Samsung Galaxy Edge and iPhone 6s. This is a huge problem. Faced with the prospect of buying a Blackberry device or an iPhone for a similar price, which percentage of the Western population (key market) will go with the Blackberry? Judging by the fact that Blackberry's mobile OS is now less popular than Samsung's Tizen, and using other evidence, that this percentage is likely to be very low.

They needed to price the Blackberry Priv to move in volume and re-introduce lost customers to their brand. This is one of the long list of mistakes which Blackberry's management has made.

Conclusion

In conclusion, Blackberry's decline from the highs of 2007 to now, has been unbelievable. This was a company which was ranked as the world's fastest growing company by Fortune in 2009. Go back to 2011, and Blackberry were able to shift 13.2 million devices in Q1. This year this figure stood at 1.1 million. And I just think that the Priv isn't the 'Messiah' of a device that Blackberry thinks it is. The promised Blackberry turnaround is not in sight. There are better tech stock to invest your money in. If it is short or long term growth you are looking for, you are unlikely to find it with Blackberry stock.

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Author's Disclosures & Disclaimers:
  • I do not hold any positions in the stocks mentioned in this post and don't intend to initiate a position in the next 72 hours
  • I am not an investment advisor, and my opinion should not be treated as investment advice.
  • I am not being compensated for this post (except possibly by Amigobulls).
  • I do not have any business relationship with the companies mentioned in this post.
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Comments on this article and BBRY stock

stocksman
neutral
The author is not talking about patents & enterprise email software which hold key value for BB. No one is expecting their phones to do well in competition with Apple, investors are probably betting on the patent value and the enterprise email software licensing revenue. Any thoughts on their valuation??
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abdulj
neutral
Thanks for taking the time to comment. You raise a valid argument. I think Blackberry's current valuation is about right. Personally, I think a company that requires share holders to cross their fingers should be approached with caution. The name of the game is to get as good a return on your capital as possible. Sometimes people invest based on 'brand name'.
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