Why Blackberry will expire
It was a nice company while it lasted. Why that won't be for much longer.
When he was younger, Max Fawcett wanted to make a mint in the markets. Now as the managing editor of Alberta Venture he gets to write about them. Close enough, right? He can be reached at email@example.com
by Max Fawcett
David and Goliath is a nice story – an inspiring one, even. But in the real world, David rarely wins the battle. Maybe his rock misses. Maybe it was never big enough to do any damage in the first place. In any case, Goliath usually ends up squashing David. That’s what’s happened to BlackBerry, and no amount of nationalistic chest-thumping or squint-eyed wish-casting can change that. To paraphrase the Wire’s Marlo Stanfield, BlackBerry’s been a dead company for a while now – it’s just been walking around not knowing it.
Let me be clear: I’m not celebrating BlackBerry’s demise. I remember the first time I ever saw a BlackBerry. It was back in 2002, and I was working as a summer student at Industry Canada in Ottawa. And while I’d never see them at the branch office I was working at out in Tunney’s Pasture (yes, that’s actually a place), whenever I visited the head office in downtown on Slater Street I’d always see at least a few strapped to the belts of some suit-wearing heavy. It was a clear sign of prestige, a marker of their importance. And the device itself seemed so powerful and so futuristic that it had an almost magical quality. I resolved to get one for myself one day. And I did, too – until I replaced it with an Android.
I’m not alone in doing that, either. In North America, the BlackBerry is a distant also-ran to the industry’s two heavyweights, the iPhone and the platoon of handsets that use Google’s Android OS – and the gap gets larger by the day. Yes, the Canadian company’s latest generation of smartphones, the BlackBerry 10, has been moderately successful (at least, when compared to the disastrous BlackBerry 7 series) with consumers and tech-geeks alike, but it needed more than moderate success. It needed a home run. The fact that it didn’t even break out shipments of the BlackBerry 10 in its latest quarterly results in June suggests that it may yet end up as a strikeout.
Indeed, as BGR’s Tero Kuittinen points out, the timing of the company’s recent announcement is curious, given that just a few months earlier it seemed confident that it could continue to survive as an independent entity. Why the change of heart? Kuittinen suggests that it may have something to do with the Q5, the value-priced model that the company rolled out in Britain, South Africa and Nigeria, some of its strongest markets. “The problem with the Q5 is that it is priced well above $400. That is the dead zone of the current smartphone market where the $600-plus niche belongs to Apple and Samsung and value buyers are migrating towards sub-$200 phones,” Kuittinen says. “BlackBerry received early sales numbers from the Q5 by the end of July from its most important Western base in the U.K. and the key emerging markets like South Africa and Nigeria. It is quite likely that these early Q5 figures were so scary they pushed BlackBerry into the radical decision of publicly announcing it may need a buyer.”
Back in North America, BlackBerry boosters will continue to point to the design features and technical superiority of the company’s new phones. They might be right, too. But in the end, none of that really matters all that much. Business has never been a meritocracy, after all, and the best product doesn’t always rise to the top. That’s particularly true when that product is competing against ones that have the backing of two of the world’s biggest corporations. As the Globe and Mail’s Sophie Cousineau pointed out in her piece on the company’s future, “with shrinking profit margins, smartphones are increasingly a commodity business. Handset manufacturers need a lot of marketing muscle to grab the consumers’ attention. A fourth-ranked player such as BlackBerry, whose global market share has fallen behind that of Windows Phones to a meagre 2.9 per cent, according to the latest figures from IDC research firm, is unable to spend enough on marketing.”
Apple and Google both generate enough cash in a month’s worth of operations to buy BlackBerry, lock, stock and barrel. The fact that they haven’t done that yet speaks pretty clearly to their Canadian counterpart’s declining fortunes. BlackBerry does have value to an acquirer, be it a private equity firm looking to carve up its assets or a larger company – Dell, perhaps, or Microsoft, with whom BlackBerry has a history of productive dealings. Its patents are worth billions alone, while its enterprise services segment and BBM messenger would be coveted by plenty of players. But as a stand-alone entity, BlackBerry is finished. David is dead. The only question that remains is who’s going to bury him.