The New BlackBerry: Is There Any Relevance to Today’s Consumer?
As a part of the plan to make the company profitable again, BlackBerry (NASDAQ:BBRY) is selling off the majority of its real estate holdings in Canada to the U.S.-based Spear Street Capital for around $278 million.
The company said it expects to sell properties with a value that is 80 percent of the deal later this month and the rest by the third-quarter of 2014. The deal includes 3 million feet of space and vacant lands, and the company said it will lease some of the space back in a bid to keep up its presence in Canada. News of the sale helped drive shares down 2.7 percent on Monday, cutting into the stock’s positive year-to-date performance.
The falling shares come in light of other problems facing the company going forward, especially relevancy. The market has spoken, and it says that most consumers prefer the full-screen touch interface offered by the Apple (NASDAQ:AAPL) iPhone and Google’s (NASDAQ:GOOG) (NASDAQ:GOOGL) Android devices over the full-keyboard design of classic Blackberry devices.
This lack of demand for its products is not BlackBerry’s fault necessarily, because this is the result of creative destruction where a new technology takes over the role or improves on the old tech, making that older one irrelevant and ancient. It just failed to modernize.
It finally released recently newer touch screen smartphones after years of promising them to the consumer and no dice. Now with products like the BlackBerry Z30 or BlackBerry Z10, it can compete with those other companies like Apple and Google out there. But, it lost so much ground and a sort of legitimacy since it stuck with the original BlackBerry. Yes, it was impressive for the time, but no so anymore.
According to Value Walk, BlackBerry CEO John Chen’s plan to make the company profitable by FY2016 will involve bringing down quarterly opex to $500 million, compared to the $577 million in the February quarter. It will, Value Walk said, have to increase its gross margins from 36 percent in FY2014 to 40 percent achieving annual smartphone sales of at least 10 million units compared to its measly 1.3 million units.
While the company has slashed fees and is trying to differentiate itself, Value Walk said the key sources of differentiation between BlackBerry and the other brands available are application provisioning, security, and identity management, and communication with BBM and secure voice. That’s all well and good, but BlackBerry has to find a way outside of all that, showcasing itself as the premiere brand of smartphone out there — but the time when everyone wanted a BlackBerry or thought they needed one has passed. Google and Apple now own the market on these types of phones.
Barrons noted that comments from Chen highlighting the Audi dashboard versus Apple trying to enter the market with CarPlay showcases prospects for BlackBerry in the automobile market. It also report BlackBerry has plans to expand BBM to Windows Desktop, which could give it a little more time in the market. But, the real question is whether or not this diversification will do it any good in the long run. It has heard the music stopping and seen the writing on the walls, but is its first effort towards modernization too late or will Chen’s efforts save the company?