The end of BlackBerry as we know it

The embattled handset manufacturer needs to be reinvented, if it is to survive.

Nicola Mawson
By Nicola Mawson, Contributor.
Johannesburg, 25 Sept 2013
The market will have to take a wait and see approach as to BlackBerry's future shape. (Photograph by Reuters)
The market will have to take a wait and see approach as to BlackBerry's future shape. (Photograph by Reuters)

BlackBerry, which has gone from being worth almost $150 a share to $9, will be radically different after it shifts focus and is bought out.

BlackBerry, with more than 60 million users globally, is set to focus on the enterprise sector at the expense of consumers, but has yet to provide clarity as to what this means. About six million subscribers live in SA.

In the midst of this shift, a consortium led by Fairfax - which owns 10% of BlackBerry - has offered shareholders $9 a share in a deal worth $4.7 billion. This comes only weeks after Microsoft said it would buy Nokia for EUR5.44 billion, or $7.3 billion at current exchange rates.

BlackBerry will also shed 4 500 jobs across the globe as it expects to report a second-quarter loss of almost $1 billion on the back of large inventory write-downs as the Z10 fails to gain traction.

The embattled device maker's shares have been in free-fall recently and the stock last closed 3.29% lower, at $8.53 - less than the Fairfax offer.

Now what?

Swift Consulting CEO and tech blogger Liron Segev says BlackBerry as we know it is not fixable, but a BlackBerry 2.0 - if done right - can be pulled off. This will require a proper focus and strategy, he notes.

Segev points out that BlackBerry was worth $100 billion in the middle of 2007. Vestact analyst Sasha Naryshkine adds that the saddest part of the $9 bid is that this is almost half the late-January price. Nokia and BlackBerry are both worth less than 3% of Apple's market capitalisation, he adds.

Ten quarters ago, the company was making record profits, says Naryshkine. The share price was at an all-time high when the company was in growth phase, back in 2007, and it reached almost $150.

Naryshkine says BlackBerry is perhaps the best known example currently of consumers falling out of love with its product. "Another reminder to always remain vigilant."

All change

BlackBerry's shift from the consumer to enterprise segment will mean a different company from one that is seen as offering free Internet and messaging to consumers, comments Segev. He says BlackBerry's shift could signal the end of BlackBerry's Internet Service for consumers.

Yet, by the time the new company emerges, consumers will have given up on the brand due to a lack of clarity, predicts Segev. 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.

This will include two high-end devices and two entry-level devices in all-touch and qwerty models, it says. 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."


Naryshkine says BlackBerry's restructuring is an attempt to recapture its former glory and return to businesses' number one phone. "I don't think that the company is that broken; perhaps it is."

BlackBerry's restructuring is a bid to drive the company towards profitability, says CEO Thorsten Heins.
BlackBerry's restructuring is a bid to drive the company towards profitability, says CEO Thorsten Heins.

Fairfax may come back with a lower price, and, when it comes to BlackBerry's future, the market will have to take a wait and see approach, says Naryshkine. "I honestly hate to see businesses fall from grace and, in years to come, I think that the comparison between this one and Palm will be well documented."

Palm was bought by HP in 2010 for $1.2 billion before being written off.

There is a lot of confusion over BlackBerry's short- and long-term future, says Segev. He does see it existing in some form, although rather as BlackBerry 2.0 than in its current shape, and potentially split up.

The question for consumers is how long they will continue to get BlackBerry services and when they should move, comments Segev. "It's just a matter of time before you, as a consumer, will move away from BlackBerry."

Segev says consumers are likely to ditch BlackBerry, even if the company will not drop consumer services straight away. The handset-maker shot itself on the foot when it launched BlackBerry 10 as it did not immediately get the phone to market earlier this year, he notes.

As there are more than 60 million people using BlackBerry, Fairfax must also be buying a user base, so it is unlikely to simply shut off consumers from 1 January, Segev points out. He adds that, although there are conditions to be met, the deal is most likely a fait accompli.

BlackBerry has typically gone into radio silence and not provided clarity over the future of its services, says Segev. As a result, end-users will be debating whether they should be buying into a company that may not be here tomorrow.

The recent events have exacerbated consumer uncertainty that arose when the company said it was putting itself up for sale. He says all the good work the handset maker did around the Z10 and Q10 units has ground to a halt.