Why BlackBerry Is Now Officially Dead

  • BlackBerry has lost one of its largest and most loyal customers, the U.S. government.
  • The company's loss of appeal and complete shift towards software may make the BB business model unsustainable.
  • BlackBerry's all-in shift toward software may cripple the company's innovative culture, furthering BlackBerry's "death spiral".

The U.S. government has, for over a decade, relied on the security-first smartphone maker BlackBerry (NASDAQ:BBRY) as its sole source for smartphones. The company's most loyal, and certainly one of its largest clients has dropped BlackBerry in favor of Samsung and Apple (NASDAQ:AAPL). This is a move which has been framed by Washington as a necessary one (see official press release), due to BlackBerry's 180 degree shift toward software, and away from new hardware (once its cash cow). Unfortunately for BlackBerry, this transition has been very public. Many companies lose their biggest client, but few have the news prominently displayed ad nauseum on every news network, radio channel, and newspaper.

No More Snob Value

What many analysts, myself included, believe to be the ultimate demise of BlackBerry (or any mass-market consumer product manufacturer) is that BlackBerry has simply lost its snob value. The BlackBerry vs iPhone discussion is one which is laughable today, although only a few years ago, it was a heated debate. Many in the industry point to a "tipping point" for mass-marketed consumer goods such as smartphones. BlackBerry was the first player to pass the "tipping point," estimated to be between 5 and 10% of the available market, but has seen its market share slip each year since 2008. BlackBerry's market share (OS) peaked at around 20% in 2008, and currently sits around 0.2%, according to market analysis by Gartner.


What's Next for BlackBerry?

Once the outright market leader in the smartphone space, BlackBerry has dwindled to a company representing a minute (and declining) fraction of the global smartphone market. The company's CEO John Chen has repeated the company's insistence on becoming a software provider, switching entirely away from smartphones. This is shown in the company's first quarter results which showed quarterly software sales outpaced hardware sales for the first time ($166M and $152M respectively). The question is: can the company count on its software revenues in the absence of hardware? It can be argued that the company's software platforms do not require proprietary BlackBerry hardware to operate, syncing well with outside hardware. This argument, in my opinion, misses the point.

The company's assertion that true synergy between software and hardware does not exist for BlackBerry is questionable. It is simply much easier for a corporate client who mandates BlackBerry in the workplace to switch to running BlackBerry software. Any time a company can sell something (i.e. a BlackBerry) and expect incremental recurring sales or revenues from that initial sale (i.e. software sales), the initial sale needs to be the focal point. The company states that it is not making money on hardware, but may not be looking far enough down the road to value its importance. A little bit of design innovation, marketing, and consumer excitement around a new BlackBerry may be a novel idea, but that is exactly how the company began and thrived. The death of the physical BlackBerry will almost certainly lead to the death of BlackBerry.

MacDonald Chris MacDonald Chris   on Amigobulls :
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Comments on this article and BBRY stock

user profile picture
How is that Chen is allowed to somewhat abandon smartphone development and research because he is unable to innovate? If he is unable to revive this smartphone company, why does he get to stay?
3 6 reply
This is a rehash of old news. The author overlooks the multi-year/multi-million dollar contract BBRY has to manage government phones, including iOS and Android. Also fails to mention the new midrange BBRY Android device, with full access to Google Play, that was designed by Alcatel primarily for bulk purchase. Review on Engadget is favorable. So take the author's spin for what it is, a biased view with only half the facts.
10 reply
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