BlackBerry: Stuck in a Jam

Blackberry

Can BlackBerry be saved?

Having last week conceded 4,500 jobs worldwide, and now reporting a $1bn second quarter loss, BlackBerry appears to have now given in to a complete takeover by its largest shareholder, Fairfax Financial, in a deal worth $4.7bn, or $9 per share.

The driving force behind BlackBerry’s recent downfall has been the underwhelming response to BB10 and its new Z10 model smartphone, the core of the company’s products line. So inevitably new leadership requires new strategy, new products and a new vision for the company, but where will Fairfax be looking to take the Canadian company?

Well first and foremost, nowhere. Chairman and CEO of Fairfax, Prem Watsa, has vowed to keep the company in Canada, citing BlackBerry as one of the biggest successes of Canadian business. On a strategic level though, it’ll be interesting to see where Watsa and Fairfax can rebuild the company. Last year, in a letter to shareholders, Watsa wrote,

The brand name, a security system second to none, a distribution network across 650 telecom carriers worldwide, a 79 million subscriber base, enterprise customers accounting for 90% of the Fortune 500, almost exclusive usage by governments in Canada, the US and the UK, a huge original patent portfolio, an outstanding new operating system developed by QNX and $2.9 billion in cash with no debt, are all formidable strengths as BlackBerry makes its comeback!

There was speculation that BlackBerry may well withdraw from the consumer market altogether, but senior director Johnathan Young has since quashed those reports. Having said that, clearly the focus is as it has always been, on enterprise. The key strengths of the company lie in the number of enterprise customers it has, including government contracts too. The biggest challenge that BlackBerry faces is maintaining its reputation with enterprise customers and keeping those contracts. Without those contracts the company disappears, but with them it has a solid foundation on which to innovate for personal consumers.

Furthermore, taking the company private will allow BlackBerry the room to innovate and develop its products without being squeezed by Wall Street into pleasing shareholders rather than pleasing customers. A priceless asset in my opinion, as the next year or so at BlackBerry could potentially see a massive overhaul of its products and services, during which time the share prices may not look too pretty.

Personally though, in spite of all this, I do fear for BlackBerry, as I think many of the general population do too. There is a possibility that Fairfax will rebuild BlackBerry enough to sustain small profits, but in terms of regaining a significant share of the consumer market, I think it’s nigh on impossible. There are far too many competitors out there who are constantly innovating and developing products, and doing it so quickly and regularly, that it’s difficult to see where BlackBerry could go that could make them a better option than say, an iPhone or Android or even Windows Phone device.

Prem Watsa though, has a reputation for digging dying companies out of the dirt, so the next couple of years will be interesting and potentially exciting for fans of BlackBerry as the focus will surely be entirely on delivering great products for the foreseeable future. Whether or not that will be enough to reshape the brand in the eyes of the consumer and offer BlackBerry as a viable alternative to the behemoths of Apple, Google and Samsung, however, remains to be seen.

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