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Does anyone remember Blackberry?

Friday, 1 May 2015

Friday, 1 May 2015

Blackberry, once ubiquitous with business users, now experiences such an unassailable void against its competitors and you now struggle to find a single handset on the high street. However, with a new CEO John S Chen, a new lead handset and the events of January things are looking up for Blackberry.

The surprising move from Samsung to acquire Blackberry at first thought seems a little out of the blue and at $7.5 Billion a significant overvaluation for a company who are a long way from the 2007 height with share price peak circa $231. Since 2007 they have lost ground to their rivals Samsung, HTC and notably Apple and currently valued at time of writing at $10 a share. Why? The answer is clear - success in the ultra competitive mobile market boils down to adaptability. Blackberry did not find a way to keep up with the changing tastes of consumers, they failed to anticipate that consumers not business customers would drive the smartphone revolution and were blinded by the emergence of the ‘app economy’. Blackberry did not realize soon enough that smartphones would evolve beyond mere communication devices to fully-fledged ‘entertainment hubs’. However, what is done is done. What happens now?

Rumours emerged mid-January that Samsung were offering to buy the company. Why? The answer to this is a little less clear. Nevertheless, Blackberry has in their armory 2 key weapons: their enterprise server and their patents.

Firstly, Blackberrys Enterprise service (BES) is the gold standard for securing and managing mobile business communications which has been deployed by thousands of private and public organisations around the world. This would provide Samsung with the option of adding greater security to their android devices providing a clear USP over Apple, which lost face over the recent celebrity hacks. Samsung has trialled other alternatives, notably Knox, however, this will take a long time to roll out and if used correctly BES could provide a significant catapult.

Secondly, Blackberrys enduring value is its patent portfolio. They have put decades of research and development into their devices, as a result they have built up a large stock of intellectual property. Blackberry owns 130 highly regarded encryption patents and if Microsoft’s move to acquire Motorola’s library of Patents for approximately $3.5 billion is anything to go by then Blackberry still commands a significant asking price. If Samsung fails in its attempt to purchase Blackberry then it is likely someone else will look to acquire it. Can Samsung run the risk of Apple getting there first? Nevertheless, as the month finished it became clear that this was all mere speculation. The message from Samsung was that a purchase would be counter to the company's strategy, particularly their development of Knox, and the only development on the horizon would be a move to work closer together not as one. Given the rise of the Internet of Things, there has never been a more important time for mobile manufacturers to be clear on their long term strategy and ensure they do not fall into the Blackberry trap.

What does this mean for Blackberry and the business customer? The answers will only come once the new Blackberry Classic (Q20) has had chance to take hold and the dust settles on Januarys activity. Early indications suggest that the Q20 may be the best handset since the Bold 9000. The RRP is 35% less than the new iPhone 6, therefore it will sit better for savvy business customers who are looking to stick to the basics of emailing and voice calls and are not tempted by the glitzy entertainment hubs of Apple and Samsung. This may bring a few Blackberry users back (if they can find a way to get hold of the handset) unfortunately, it is unlikely to reverse the fortunes of the company. Blackberry will simply need to wait for a buyer, or merger and hope that the value of BES and their patents will be enough to command a decent return. Samsung’s move will fill Blackberry and their shareholders with hope that there is still light at the end of the very long tunnel.

Written by Tim Pakenham - 27/02/2015



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