Will its new smartphone slay the company's demons and revive its vanishing handset sales?
BlackBerry may be on the ropes, but the company hasn’t lost the will to fight.
Next month, the company is expected to release the Passport, a new model of smartphone that fuses the company’s signature QWERTY keyboard, slimmed to three rows and strictly alphabetical, with an unusual 4.5-inch square display. The device has been called a “phablet,” the term for a tablet-like smartphone, though it is comparatively squat. It’s best suited for the inside pocket of a jacket.
Which is exactly the point. The Waterloo, Canada-based company BBRY hopes that its device will be used by the enterprise customers it lost in recent years as it failed to keep pace with rivals like Apple and Google. BlackBerry hopes that government, finance, and health care workers find the device’s unorthodox dimensions ideal for their work.
“It’s great to see BlackBerry step outside of its comfort zone and forge its own path in terms of design,” says Ramon Llamas, an analyst for the market research firm IDC. “Passport won’t get confused with previous BlackBerry models like the Bold and Q10, and the large screen keeps BlackBerry in pace with the competition.”
Keeping pace may not be enough. For the second quarter of 2014, BlackBerry’s global market share, as measured by shipments, was a paltry 0.5%, according to IDC estimates, down from its all-time high of 20% five years ago. Still, strong single digits may be enough to convince shareholders that the company is making the right decisions.
“By going back to their enterprise client base, CEO John Chen is being realistic with what he can accomplish,” says Wayne Lam, a telecom electronics analyst at IHS. “But unless he can stop enterprise customers from jumping ship and having the BB10 operating system decline into irrelevance, no measure of design innovation can really help him remain viable.”
Ken Dulaney, an analyst at Gartner, concurs: “The issue will be the Blackberry 10 software. While well designed, it suffers from a lack of applications and doesn’t have the funding that Microsoft, Apple, and Google have.”
Or the partnerships. In July, Apple AAPL and IBM IBM announced a partnership in which IBM would sell Apple’s iPhone and iPad, loaded with IBM applications for data analysis, to business customers. It’s a move that gives Apple serious support in a market where it traditionally has been weak and, it’s no coincidence, where BlackBerry has traditionally been strong.
“This move is a huge danger for BlackBerry,” Lam says. “If IBM can help legitimize the use of iPhones and iPads in enterprise, BlackBerry will be left with nowhere else to go.”
BlackBerry’s CEO Chen, who was officially named to the post in November, has never predicated his turnaround strategy on a massive revival of smartphone sales. Instead he worked to turn BlackBerry Messenger, an application that continues to be a point of differentiation for the company thanks to industry-leading security and encryption for wireless text and e-mail communications, into a significant source of revenue by signing licensing deals with Android and Apple.
Further, BlackBerry’s QNX software division—named for the operating system it acquired in 2010—is developing new technologies for the automotive and cloud-services industries. “Chen is opening BlackBerry to more ecosystem partners, which in turn adds value to the BlackBerry solution,” Llamas says.
But that doesn’t mean Chen wouldn’t like to see BlackBerry smartphones take a new lease on life—especially now that profit margins have been greatly improved by his decision to outsource manufacturing to Taiwan’s Foxconn Technology Group.
“What BlackBerry needs to do is focus the value proposition they offer to enterprise as well as their renowned security capabilities,” Lam says. “They need to win in offering the better solution to Fortune 500 companies. The hardware innovations are just the icing on the cake.” Still, how sweet it would be.