BlackBerry's decision to abandon its buyout plan and have its CEO step down will not affect its South African customers, says the embattled smartphone maker.
The company says its latest handset, the BlackBerry Z30, will be locally available soon and it has confidence in its strong and loyal customer base in SA.
Yesterday, BlackBerry announced it will no longer look at a buyout option, but rather attempt to raise $1 billion by issuing convertible notes to a group of long-term investors, including its largest shareholder, Fairfax Financial Holdings.
Thorsten Heins will step down as CEO, and John Chen, the new chairman, will head up the company while it searches for a new CEO.
This wraps up its process of looking for strategic solutions. It has also been cutting costs and retrenching staff amid a large inventory write-down, because the Z10 failed to gain traction.
While BlackBerry sees the $1 billion investment as positive and a vote of confidence in its future, its shares tanked on the news yesterday, closing 16.41% lower to end the day at $6.49.
The company now has a market capitalisation of $3.34 billion, while Nokia, which is being bought out by Microsoft in a $7.3 billion deal, is worth $29 billion.
BlackBerry's stock is now worth almost a third less than when Fairfax offered $9 a share in the $4.7 billion deal. The fall in its stock price reflects the decline in its popularity: in the middle of 2007, it was worth $100 billion, and was making record profits just 10 years ago.
Globally, BlackBerry's market share is expected to drop from 2.7% this year to 1.7% by 2017, says the IDC. Vestact analyst Sasha Naryshkine says its stock is now almost at "dead lows".
The fact that there is not a queue of companies lining up to buy BlackBerry shows the smartphone maker does not offer a compelling solution, says Naryshkine. "This is a business that is a shadow of its former self."
The handset company recently moved to reassure its loyal fans that it was business as usual and that it can be counted on. In an open letter, published in major publications around the world, it says it has "substantial cash on hand and a balance sheet that is debt-free". Naryshkine says BlackBerry may have a lot of cash, but it is burning through it.
Clarity, at last
Mike Sharman, owner of digital communications agency Retroviral, sees BlackBerry's decision to abandon plans to sell as a positive move. "The company is taking a lot more control of itself. John Chen, who is taking over [as interim CEO], has a lot of experience and will be able to give BlackBerry strong direction when stepping up to the plate."
He also points out that while BlackBerry has taken a market share knock in SA and Africa, the company has been looking at its service offering, software and hardware around the continent. "They have taken a stand and are taking the right steps. It is an interesting time for the industry."
Ovum analyst Richard Hurst says the latest development is not necessarily bad news for BlackBerry users. "There has been a lot of uncertainty hanging around BlackBerry. At least now a decision has been made that they are not going to sell and they are changing leadership. On the surface, it might seem like bad news, but it could be really positive."
Hurst notes credit must be given where credit is due, and that BlackBerry has proven it can stand on its own two feet and continue to come up with innovative products, even in difficult times. "Those who have turned away from BlackBerry have turned away, but the loyal users will always remain with BlackBerry unless something radically changes."
There is a place for BlackBerry's offering in emerging markets, which has mostly been ignored by high profile brands, says Hurst. He adds broadband is still expensive in emerging markets, which gives its BlackBerry Internet Service (BIS) an edge. "It's not all over for BlackBerry."
Alexandra Zagury, who was appointed as BlackBerry's MD for sub-Saharan Africa, last June, said at the time the region was one of its most important growth markets. "We are proud of the company's success in this region, particularly in SA where BlackBerry is the leading smartphone brand."
Losing traction
Ovum's latest research shows BlackBerry is still a favourite among South African smartphone users, in second-place behind Android, but ahead of Windows, iOS and other smaller operating systems.
BlackBerry currently holds 20% of the South African smartphone market and this is forecast to drop to 11% by 2017, says Hurst. Android, iOS and Windows are all expected to grow in this period, with Android taking the lion's share at 72% in 2017.
However, BlackBerry is facing competition in its "bastions of strength", says IDC. While it expects smartphone shipments to Africa to double in the next four years, BlackBerry will hold the second spot until 2014, after which it will be overtaken by iOS, it predicts.
BlackBerry's global declining market share is due to "tepid BlackBerry 10 reception" and "emboldened" competition that is eating at BlackBerry's share in Africa, Latin America, and the Middle East.
Uncertain future
Naryshkine says BlackBerry may be gone by June 2015, to coincide with the 200-year anniversary of the battle of Waterloo - a fight with which BlackBerry shares the name of its home town. "BlackBerry was the phone that everyone wanted; that was then... [Now] it's like selling horse buggies in the 1920 when everyone wanted a model T-Ford."
For BlackBerry to grow its share, it must do something revolutionary, but it lacks the cash to innovate, says Naryshkine. He adds it seems as if BlackBerry is dead in the water, because of the lack of potential suitors.
BlackBerry has said it will transition its future smartphone portfolio from six devices to four, with a focus on enterprise and prosumer-centric targeted devices.
At the time, CEO Thorsten Heins said: "We are implementing the difficult, but necessary operational changes announced today to address our position in a maturing and more competitive industry, and to drive the company toward profitability.
"Going forward, we plan to refocus our offering on our end-to-end solution of hardware, software and services for enterprises and the productive, professional end-user. This puts us squarely on target with the customers that helped build BlackBerry into the leading brand today for enterprise security, manageability and reliability."
Although there is no clarity as to what BlackBerry will do next, and whether its BIS will survive, Naryshkine postulates that someone may buy the service. He adds, however, that other messaging services are becoming commonplace and BIS's attraction in emerging markets will lose its lustre as broadband prices come down.
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