Edition 54
Blackberry: Is there still value?
by Seth Schachner, Managing Director, Strat Americas

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Lost in the coverage of Blackberry’s appointment of a committee to seek strategic options: the notion that there is still real value in the company, both as a vehicle for content and for the enterprise. Blackberry also has ongoing potential to hold on to market share in emerging markets, where it is traditionally strong.

Blackberry has clearly had its lunch eaten by Samsung and Apple smartphones in developed markets. While its handsets led in some emerging markets like Argentina, Venezuela, and parts of Asia and Africa, this may have camouflaged the company’s longer term issues.

Blackberry’s market share has now started to erode globally, too, even in Canada, its home. Behind this is the continued growth of Android, new local smartphone competitors in big markets like China, and the promise of a lower priced Apple handset.

The smartphone market is neither easy to penetrate nor sparse: there are roughly a dozen major smartphone brands available in developed markets, but some say Apple and Samsung usurp more than 95% of the profits in smartphone handset sales. Competitors like Sony Mobile, HTC, LG, Motorola, and Chinese brands like ZTE are left with crumbs. Imagine how these competitors try to plot new product road maps in such an environment.

And beyond the US & Europe, top of the line smartphones are unaffordable for many consumers, so lower priced “feature phones” or newer classes of “social phones” make up the bulk of the market. (These mimic some, if not all, of the features of a top of the line handset like the iPhone.)

A key challenge for Blackberry will be to play to this part of the market. Its BB10 is too high priced, though, so the company must look to its new, lower priced Q5 (which comes with a traditional keyboard) as a vehicle to retain or grow share in emerging markets. One example of this is Blackberry’s 8520, an “entry level” smart phone released four years ago, which is still strong in some emerging markets.

The obstacles are daunting, though. For one, the user experience with content and traditional Blackberry services like email may not please hard core Blackberry consumers: Blackberry 10 sends data and email to the mobile operator network, rather than through Blackberry’s servers. This can have huge business implications for Blackberry—the company may forgo the fee it charged to operators in the past for the use of its vaunted, secure network.

And Blackberry’s app environment trails those of Apple and Android by a big margin. Its current app environment requires developers to build apps from scratch for the new Blackberry operating system—a real cost consideration for many companies who would prioritize building apps for Apple, Android, and perhaps even the Windows Phone 8 environment first.

Blackberry definitely cannot afford to give up on content, either, so the app environment supporting its new devices will remain a priority. Over the last few years, it’s been estimated that the company dismissed as many as 7,000 employees. But some say Blackberry’s teams working to develop apps have been untouched and currently remain intact with plans to grow.

And more broadly, Blackberry does have some elements working in its favor: the company has a large cash reserve (roughly $3 Billion), it is debt-free, its enterprise network is strong and valuable; and the company sits on patents that some estimates value as much as several billion dollars.

Coming months should tell how Blackberry weaves these assets together, or breaks them apart. Either way, it needs to answer the considerable challenges in front of it. For now, we’re not jumping to count them out.
Seth Schachner is a highly experienced digital executive, with a background in entertainment, digital media and technology.

Schachner is Managing Director of Strat Americas, a Miami-based business development enterprise which provides strategic guidance and helps global clients connect with partnership and deal opportunities.

Strat Americas recently facilitated or negotiated client partnerships with Xbox, Microsoft, and Amazon. We are also actively driving audio & video partnerships, including recent international content partnerships for major artists in international markets, and licensing for a Latin American personalized radio service.

As Microsoft Advertising’s Business Development & Strategy Lead, Schachner helped lead audience and revenue opportunities for MSN, Windows Live, and Windows 8.

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