BlackBerry has been reduced to a niche smartphone player (Part 4 of 12)
BlackBerry introduced the Classic smartphone with a physical keyboard
In the previous part of this series, we discussed why BlackBerry (BBRY) couldn’t reap the benefits of the Passport’s successful launch last quarter. BlackBerry introduced another important smartphone last month—the Classic. As the name suggests, the Classic takes brings back old BlackBerry features along with the re-introduction of the physical keyboard.
After the launch of the BlackBerry 10 operating system in 2013, the company had stopped introducing smartphones with physical keyboards and launched touch-screen phones only. BlackBerry may have changed this strategy due to the increasing popularity of Apple’s (AAPL) iPhone and other touch-screen smartphones introduced by Samsung (SSNLF), Sony (SNE), and Lenovo (LNVGY). However, BlackBerry quickly realized that it can’t compete in this market—and it’s better that it focuses on what it had been doing best, which is catering to enterprise professionals’ productivity needs.
Enterprise customers have remained die-hard fans of BlackBerry’s smartphones due to their physical keyboard. The physical keyboard provides ease of use for working professionals—especially for writing emails and taking calls—which is why BlackBerry listened to their demands and brought back this feature.
BlackBerry introduced superior features in the Classic
The Classic has better specifications that its predecessor, the Bold 9900 smartphone. The Classic’s screen size is larger than the Bold’s at 3.5 inches, although much smaller than the 5.5-inch Apple iPhone 6 Plus screen size. It has a dual core 1.5 GHz Qualcomm (QCOM) Snapdragon processoralong with 2 GB of RAM. The above chart shows the difference between the Classic and the Bold 9900, which makes the Classic a superior smartphone to the Bold in terms of specifications.
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BlackBerry: A Year In Review
Can BlackBerry Be The Comeback Kid?
For years the market has pronounced the death of BlackBerry. As another year comes to a close, I find myself reflecting on what has transpired with BlackBerry and the mobile industry. The name BlackBerry was synonymous with mobile phones, keyboards and email. Today, some of these elements still hold true. In a market where all smartphones look similar, BlackBerry returned to its signature physical QWERTY keyboard on the recently released Classic and also offered a keyboard on a square shaped phone called the Passport. I had the opportunity to use the Passport and appreciated its screen size and keyboard.
Yet, the mobile market has evolved and so to has BlackBerry. It would be foolish to think of BlackBerry as solely a mobile phone manufacturer. It’s clear that phones are a part of its vision but not the entirety of its vision. Smartphone sales won’t be the linchpin for a market turnaround.
A Year of Big Announcements
For a theoretically dying company, BlackBerry has been very busy. It returned to its roots as an enterprise company and strengthened its position as a security company. It’s defining a path to evolve from a hardware company to a software and services firm. Let’s recap a few of BlackBerry’s accomplishments over the past year. The company:
Bolstered its consumer app story via a partnership. One of the big knocks against BlackBerry (and Microsoft for that matter) was its lack of consumer mobile apps. The ability to run Android apps on a BlackBerry has lessened this concern. To further alleviate this problem, BlackBerry struck a deal with the Amazon Appstore to make it easier to download apps. It also expanded its enterprise focused mobile application ecosystem through partnerships with Bloomberg LP, Box, CellTrak, Cisco, Entrust, SAP, and others.
Made a significant play for the enterprise mobile management market. EMM is a critical part of any enterprise mobile strategy. BlackBerry was known for management of its devices but needed to offer these services across a wider range of mobile operating systems. The company offered cross-platform mobile device management in BES12. It also inked deals with BrightStar and Ingram Micro to distribute BES12.
Bolstered its security across all product categories from phones through software. It purchased Secusmart to provide additional voice and data encryption and anti-eavesdropping solutions. It acquired Movirtu, a Virtual SIM platform that allows employees to have two phone numbers (read split between corporate and personal use) on a single device. It announced BlackBerry Blend for the enterprise which makes it possible for employees to securely accessing personal and work data from their BlackBerry smartphone on any desktop or tablet. It also offered Enterprise Identity by BlackBerry, VPN Authentication by BlackBerry, and BBM Protected (for Android, BlackBerry and iOS platforms). In general, the company has been heavily focused on providing a wide range of security solutions.
Added new partners. In a surprise move, BlackBerry partnered with Samsung to deliver richer mobile security for Android. It also signed a strategic agreement with Salesforce.com to connect Salesforce.com customer relationship management (CRM) apps and platforms to BlackBerry’s EMM solution.
These are just a selection of the company’s announcements. Overall, it was a good year for BlackBerry. The company invested heavily in developing and acquiring solutions to meet enterprise mobility demands. It also quelled fears that it would run out of cash by effectively managing its supply chain, inventory, and expenses.
While it still declined in smartphone market share, phones aren’t the future lifeblood of the company. (In fact, it’s hard for anyone except Apple and Samsung to earn a living at making phones.) I expect smartphones will become just one piece of an integrated, highly secure portfolio that includes software and services. A business customer can either purchase these devices as part of the holistic solution or simply choose to use the software and services.
As I look around the globe, the studies from Lopez Research highlight that companies are reevaluating BYOD. They’re still offering BYO program but many are also considering purchasing devices for their employees (especially for tablets and next generation PCs). In certain areas, specifically regulated and security conscious industries, BlackBerry could see new device purchases as the corporate-liable market regains steam. For example, Mackenzie Health, a regional healthcare provider serving a population of more than half a million people, announced that it will use the BlackBerry Classic and BES12. But the real win for BlackBerry will be in providing new security and identity/authentication services and management for non-traditional devices, such as IoT.
In the Long Run, BlackBerry Is A Software Company
While I’m certain that BlackBerry bashing will continue, BlackBerry has survived yet another year and in far better shape than any of us had expected. It’s stabilized and proven that it can shift its focus to upcoming growth markets such as security, identity and the Internet of Things. The challenge in the coming year is growth as a software company. This is no small feat given that almost half of BlackBerry’s revenue comes from hardware sales. It’s also not easy to grow into a software behemoth. For example, it took Salesforce.com years to become a software powerhouse. It’s not impossible. It just takes time and the financial market is an unforgiving place.
This will be a multiyear journey for BlackBerry. The market should expect BlackBerry’s revenue to take a hit as it manages this transition. With careful money management, the company should the cash ($3 billion) to navigate the transition to a software company. Businesses should evaluate BlackBerry based on its stated direction and execution against that vision. This year has been a good start.
Maribel is the founder of Lopez Research LLC, a market research firm focused on mobility. She’s also the author of the Wiley book “Right-time Experiences: Driving Revenue with Mobile and Big Data.”
Year End Tax Planning / Read more on Offshore Tax Shelters http://www.youroffshoremoney.com
It Has a Fantastic Physical Keyboard, Great Productivity Apps and Even a Trackpad
A traditional keyboard and trackpad make the BlackBerry Classic a throwback to the smartphone’s early days. WSJ’s Joanna Stern reviews the best BlackBerry ever.
By JOANNA STERN
BlackBerry began shipping the Classic last week, a smartphone that the company hopes will send us all the way back to the early 21st century, when keyboards had keys and apps were what you ordered at TGI Fridays.
The Classic is a throwback to everything that made a BlackBerry a BlackBerry. Instead of a big and awkward square-shaped design like the recent BlackBerry Passport, the Classic has the fantastic physical keyboard, the pleasantly nagging red notification light—and even a trackpad. And forget “Tiny Wings,” this baby has “Brick Breaker”!
The Classic—which currently costs $450 unlocked on Amazon, and will arrive at Verizon and AT&T in the new year—harks back to when smartphones were used primarily for email and other work. That’s great if you just want to get more done with a physical keyboard and powerful productivity apps, but frustrating if you want more. For anything beyond basic Web surfing—like Netflix, Google Maps, Uber, even airline apps like JetBlue—you’re better off with a more modern phone.
Time for a Comeback
For former BlackBerry users, the Classic will feel like reuniting with a long-lost friend. As I hopped on the train and quickly pulled the phone out of my pocket to write down a quick thought for an article, I imagined Etta James’s “At Last” playing in the background.
Unlike the BlackBerry Passport, the Classic is perfect for one-hand use. With a stainless steel frame and a soft plastic back, the 6.3-ounce phone feels heavy, but in a good way. And it feels more substantial than those delicate big-screen smartphones, like it won’t shatter after an accidental drop.
I have been searching for just the right words to profess my love to BlackBerry’s perfected physical keyboard for a decade. It’s hard to describe how my thumbs dance on the fantastically sculpted keys without having to look down at them, or how the metal frets give the perfect amount of spacing to the rows.
But I’m not unreasonably nostalgic. No other smartphone makers sell phones with actual plastic keys anymore. Software keyboards with auto correct and predictive text can do nearly everything real keys can, then vanish when they aren’t needed. Still, I remain optimistic that a few outliers like the Classic will survive long enough to see, at least, the next president.
The Classic’s physical keyboard has fantastically sculpted keys.
Between the keyboard and screen, BlackBerry has resurrected the “belt” of navigation buttons—menu, back and call/hang-up, along with the mouselike trackpad.
BlackBerry could have used that space to make the screen bigger. The crisp 3.5-inch, 720 x 720-pixel touch screen is rather cramped. Yet I was surprisingly happy to see the return of the trackpad. It’s great for editing emails with more precision and selecting small links on Web pages.
BlackBerry may have fallen behind its competitors in mobile innovation over the past decade, but it still leads the pack in two mobile essentials: battery life and call quality.
Even on days of heavy use, I had 20% remaining before going to bed. I still do wish the Classic’s battery was removable (for swapping out or attempting the old-school reboot trick) and didn’t take so long to recharge.
And it’s the BlackBerry Classic—not my iPhone 6 or Moto X—that I reached for when I had to make an important phone call. Not only did the calls sound extremely clear, but people on the other end said I sounded like I was calling from a landline.
The Classic trumps the competition in software with its Hub feature, too. A quick gesture takes you to BlackBerry 10’s universal inbox from any screen, putting communications more readily front and center than other mobile operating systems.
Gone is the Web browser that caused misery to Bold and Curve users. It now loads full-size Web pages by default and does it extremely fast. The small screen means you have to do plenty of pinching and zooming, but at least it renders quickly.
There are far more email-formatting options on the Classic.
The rest of this column could have been a list of reasons why the BlackBerry email and calendar still beat iOS and Android’s for me. In the interest of space, though, here are some favorites: There are far more email-formatting options, including font size and bulleted lists. You can view all the attachments in your inbox, and then easily edit them in Documents To Go. With one tap, you can turn an email chain into a calendar appointment.
BlackBerry is also quick to remind us that one of the Classic’s biggest advantages over the competition is enterprise security. The Classic has system-wide 256-bit AES encryption, and BlackBerry Messenger Protected and the BES email system have end-to-end encryption.
BlackBerry has updated its services to show it understands there’s a need among its users for certain popular features, like BBM video messaging (which includes a sticker store!) and a Siri-like personal assistant that can help send emails and look up popular restaurants. But the company also wants you to be able to keep that work and play separate: Balance puts a secure barrier between your work and personal content and apps.
Stuck in the Past
But while I’d love for all those great BlackBerry features to make a comeback, others simply feel out of date.
Calendar and email aside, other preloaded apps are slow and poorly designed. A Rand-McNally map from the gas station is likely more up-to-date—and speedier—than BlackBerry’s own maps app. Not only did it struggle to help me find the closest Starbucks in New York City, but it lacks typical features like transit directions and 3-D map options.
BlackBerry recommends dissatisfied users try third-party apps, like Waze or Navfree. But while BlackBerrys can run Android apps, the industry-leader Google Maps isn’t available for the platform.
That brings me to the terrible and confusing app situation. There are now two app stores preloaded on the Classic: Amazon’s App Store and BlackBerry World, which sounds like an amusement park I would have loved in 2008. While you can download Android apps from Amazon’s App Store, many big ones are missing—not just the Google family of apps, but also Uber and Instagram.
You can ignore BlackBerry’s warnings and load other Android apps manually, but it takes work. Most apps lying around the Web are out of date or available on shady sites. And if you do find the most recent apps (or go through the annoying process of downloading them on another Android phone and then transferring them to the Classic), they may not resize well to fit the Classic’s square screen.
The Classic has an 8-megapixel camera. ENLARGE
The Classic has an 8-megapixel camera. EVAN ENGEL/THE WALL STREET JOURNAL
I did find and install a year-old version of Instagram. That meant no new filters. But filters can only help so much anyhow: The Classic’s 8-megapixel camera, while fine for basic outdoor or well-lit shots, can’t rival the newest Android and iPhones when it comes to picture quality and speed.
To top it off, I found many of those apps—and even the overall operating system—to be sluggish at times, taking too long to open an app or message.
Still, I believe the Classic is the best BlackBerry ever made. It lives up to every bit of the BlackBerry’s original purpose. This is the best phone to get if you need a real physical keyboard to plow through emails, manage your calendar, browse the Web…and not much else.
When you use it, you will feel like no time has passed at all. And that is, of course, its biggest shortcoming.
Blackberry was upgraded to buy from hold at TD Securities. $13 12-month price target. Despite a hardware sales miss, expect new software services to drive earnings power, TD Securities said.
- “BlackBerry is effectively transitioning to a cross-platform software/services company. In this context, the device business should not be banked on to generate profit,” says TD Securities, upgrading BlackBerry (NASDAQ:BBRY) to Buy after the company reported mixed FQ3 results, a 56% Y/Y drop in end-user phone sales, and a ~100% Q/Q increase in BES10 licenses.
- TD sees BlackBerry shipping 8.9M phones in FY16 (ends Feb. ’16) – less than the 10M the company has said it needs to turn a profit on hardware – at a 15% gross margin. ~75% of FY16 gross profit is expected to come from software and legacy services.
- BlackBerry has forecast its software revenue will double in FY16, and that its services revenue will fall by 50%. Shares are now above where they traded prior to the FQ3 report.
On top of laser weapons, passenger jets and space stuff Boeing is also, weirdly, building an ultra-secure Android smartphone called “Black” (not to be confused with theBlackphone). According to the Telegraph, it’s now enlisted BlackBerry’s help to make it even more secure, though it’s not clear how, exactly. Blackberry CEO John Chen said “we’re pleased to announce that Boeing is collaborating with BlackBerry to provide a secure mobile solution for Android devices utilizing our BES 12 platform” and quickly added, “that, by the way, is all they allow me to say.” The Boeing Black smartphone recently cleared the
FAA FCC and comes with all the stuff a spook or G-man could want.
That includes dual-SIM capability, which is unusual for a US-built device but would be very helpful for intelligence agents. (Incidentally, if you pull a Boeing Black smartphone out at airport security, doesn’t it automatically give you away as a spy?) It also has swappable backplates that allow satellite or radio capability, solar power chargers and biometric sensors. Security-wise, it includes disk encryption, hardware crypto capability and the pièce de resistance: a case that will delete all user data in case of tampering.
Though Boeing’s role in the whole thing may seem odd, it has an inside track with the defense and security community, and specifically developed its Boeing PureSecure system for mobile devices. At this point, BlackBerry is certified for use by the DoD, but as far as we can tell, Samsung’s Knox is still the only system okayed by the NSA to carry classified documents.
BlackBerry (BBRY) shares were sharply lower in early trading. The struggling smartphone maker reported a surprise profit in the third quarter, but a big miss on revenue. Sales were down more than 33% from a year earlier.
TORONTO, Dec 19 (Reuters) – BlackBerry Ltd on Friday reported a small adjusted third-quarter profit and returned to positive cash flow, but shares fell as revenue declined more than expected.
Revenue fell to $793 million from $1.19 billion a year earlier, falling short of expectations. Analysts expected $931.5 million.
BlackBerry’s Nasdaq-listed shares fell 5.6 percent to $9.50 in premarket trading.
Cash flow was positive $43 million in the third quarter, while the company had negative cash flow of $36 million in the second quarter. BlackBerry had said it was targeting break-even cash flow by the end of the fiscal year in February 2015.
- Cowen (Market Perform) likes BlackBerry’s margin improvement and BES license growth – ahead of the BES12 launch, BES10 licenses roughly doubled Q/Q to 6.8M, aided by the EZ Pass migration program (to be ended soon). “Software growth remains the critical driver of the long-term turnaround.”
- S&P (Hold): “We are encouraged by a return to positive cash flow, reflecting margin improvement from cost cutting efforts. We see BBRY growing its mobile device management business … We anticipate BBRY focusing on growing its software offerings and expect its hardware business to remain at depressed levels.” MDM software rival MobileIron (MOBL +6.6%) is up strongly.
Colin Gillis, tech analyst at BGC Partners in New York, said BlackBerry Chief Executive Officer John Chen did a good job controlling expenses to boost the company’s cash pile.
“The fact that he overachieved by turning cash flow positive this quarter. That’s a great milestone,” said Gillis. “It gets easier from here.”
Excluding, a one-time non-cash debenture charge and restructuring charges, the company reported a profit of 1 cent a share. Analysts polled by Thomson Reuters I/B/E/S expected a loss of 5 cents.
The Waterloo, Ontario-based company reported a net loss of $148 million, or 28 cents a share, in the quarter ended Nov. 29. That compared with a year-earlier loss of $4.4 billion, or $8.37 a share.
BlackBerry launched its long-awaited Classic smartphone on Wednesday, hoping to help win back market share and woo customers still using older versions of its physical keyboard devices. The phone resembles its once wildly popular Bold and Curve handsets.
Hint: It’s not about smartphone sales volume or market share.
The BlackBerry Classic, as its name implies, is a throwback to the company’s glory days. But the smartphone plays an important role in BlackBerry’s future.
BlackBerry hopes the Classic will drive interest and adoption of the company’s services and software.
Wednesday’s BlackBerry Classic event kicked off like most other phone launches: a video played to hype up the BlackBerry name, CEO John Chen made a few remarks and then pulled out the Classic for a photo opportunity. But as the presentation went on, it was clear whom the company was targeting: the IT guy working in a highly regulated business.
The conversation dashed past the typical walkthrough of the Classic’s features, with a healthy chunk of time spent on the phone’s enterprise software capabilities. Guests touting the business possibilities included chief information officer for Citco Fund Services, the founder of Niederhoffer Capital Management and the chief operating officer of Ontario-based Mackenzie Richmond Hill Hospital.
It’s a far cry from Alicia Keys, the pop music sensation BlackBerry once played up as its “global creative director.”
CNET review: BlackBerry Classic – great keyboard, cramped screen
The change in tactic is part of BlackBerry and Chen’s attempt to transform the company from a device maker into one more reliant on software and services. Services such as BlackBerry Messenger and its mobile device management platform, BES 12, are the future, but the company still needs BlackBerry phones to keep it in the mobile game — and generating revenue.
“They need devices to underpin the core value propositions,” said Charles Golvin, an analyst at Abelian Research.
A familiar face
The BlackBerry Classic takes its design cues from the BlackBerry Bold franchise — the last flagship BlackBerry line that resonated with consumers. With its familiar trademark keyboard, it serves as a bridge for diehard BlackBerry users still typing away on their old Bold and Curve phones and gives them a reason to upgrade to the new BlackBerry 10 operating system.
While the smartphone was clearly designed to cater to BlackBerry’s existing base, the company hopes to attract new users, touting the physical keyboard, messaging hub and longer battery life as attractive characteristics.
“I invite a lot of people who haven’t used BlackBerrys before to have a try at it,” Chen said. “I think you’ll like it and be surprised by it.”
But with a new generation of users weaned on touch-screen iPhones and Android devices, it’s unlikely that many will take a chance on a platform that still lags behind on games and other personal apps.
“We shouldn’t delude ourselves into thinking they will go after a broad appeal,” Golvin said. He added the only potential customer growth could come from attracting former BlackBerry users into switching back.
“It’s wishful thinking,” said Avi Greengart, an analyst at Current Analysis.
Interest in BlackBerrys has waned over the years. Over the past five years, it went from a peak of a fifth of the market in 2009 to just below 1 percent in the third quarter, according to Gartner.
A quiet launch?
But BlackBerry isn’t competing anymore in the mainstream smartphone market, a rough-and-tumble arena where Apple’s iPhone reigns supreme and rivals such as HTC’s One M8, LG’s G3 and Samsung’s Galaxy S5 battle for second place. While Chen has said his goal was to run a profitable smartphone business, that doesn’t necessarily equate to huge volumes.
Just look at the BlackBerry Passport. The smartphone was launched with much fanfare in September, but aside from early preorder numbers, it has largely faded. AT&T, which vowed to carry the smartphone, won’t carry it until next year. Analysts regard the Passport as more of a novelty.
Given the demand from hardcore BlackBerry users, the Classic may get different treatment. But Chen declined to comment on whether AT&T and Verizon Wireless would provide marketing support for the Classic, which launches in the quieter post-holiday period in January. BlackBerry is taking orders for the Classic now on its own website, selling a version compatible with AT&T and T-Mobile for an off-contract price of $449. AT&T and Verizon haven’t provided specific availability and pricing.
Regardless, the BlackBerry devices play an important role. They remain a major financial pillar, making up 46 percent of the company’s revenue in the fiscal second quarter. The company reports its third-quarter results on Friday.
More critical is the role the phones will play in convincing big businesses to switch to BlackBerry services, according to 451 Research analyst Chris Hazelton. While BES12 is able to manage multiple mobile devices, including iPhones and Android smartphones, the BlackBerry Classic gives the companies reason to upgrade their systems.
BlackBerry is offering the Classic with different enterprise and security bundles, an example of how it hopes to make money off of its security aspect. It’s a sweet spot that Chen, who boasts a strong history with enterprise software companies, wants to get the company moving toward.
“It is very much enterprise focused at this point, and that’s absolutely the future of the company, which I think is a good thing,” said Jan Dawson, an analyst at Jackdaw Research.
Chen also has a more ambitious vision for devices, which goes beyond smartphones. “It’s also the precursor for the whole [Internet of things] market,” he said. “I don’t look at devices as just a phone business. I look at it as much broader downstream.”