UPDATED 09:00 EDT / JANUARY 15 2015

BlackBerry CEO John Chen NEWS

BlackBerry is poised to make a stunning comeback in 2015

BlackBerry CEO John Chen

It wasn’t long ago that BlackBerry was considered to be a major player in the smartphone race, owning a big slice of the consumer market and competing with both Apple and Google. What followed was a spectacular fall from grace as the company missed the smartphone pivot and all but collapsed in the space of just a few years.

Things got so bad the company was forced to abandon plans to sell itself last year for lack of a buyer.

That was 18 months ago, but since then a ragged and humbled BlackBerry has re-emerged with a new strategy that’s laser-focused on the enterprise. John Chen, the company’s CEO, said last month the company had successfully completed the first stage of its turnaround plan and is now focused on a return to profitability.

It’s not just Chen who thinks BlackBerry’s fortunes are on the up. Samsung is another believer. Indeed, the Korean firm is so convinced by Chen’s turnaround that it’s reportedly mulling over a $7.5 billion bid to acquire the company outright. BlackBerry, whose market cap lies at $5.6 billion, has so far denied the reports, but the very suggestion that Samsung is ready to pay a 30 percent premium hints at a lot more to come from BlackBerry as Chen completes his turnaround strategy.

But will BlackBerry really defy the odds and stage a comeback?

BlackBerry’s death spiral

 

It’s hard to recall a brand that’s fallen as hard and as fast as BlackBerry did. In 2009, some 40 percent of US smartphones wore the BlackBerry badge, according to ChangeWave Research. That figure has since slumped to less than one percent, according to Consumer Intelligence Research Partners.

BlackBerry failed to make the pivot from email device to smartphone. Apple’s iPhone was first released in 2007, and within three years it overtook BlackBerry as the number one smartphone by market share. Android then shoved both brands aside to claim the top spot in market share. Meanwhile, BlackBerry’s share plummeted to just 4 percent by 2012, according to International Data Corp.

Recognizing it was in danger of entering a death spiral, BlackBerry threw a last ditch Hail Mary with the release of its first touchscreen device, the BlackBerry Z10, together with the BlackBerry Q10 sporting a QWERTY-keyboard and running on a revamped BB 10 operating system. But despite these efforts and positive reviews, neither device caught on with consumers, and in March, 2014 the company posted a shocking $5.9 billion loss.

BlackBerry’s dismal performance saw some analysts labeling it the “walking-dead smartphone company”, but then along came John Chen, the executive who had successfully reversed Sybase’s death spiral 15 years earlier. As the new CEO, Chen promised a return to profitability by March, 2015. And he’s delivered, with time to spare.

Chen’s ‘Passport’ to recovery

BlackBerry PassportChen has sold off assets and forged new partnerships to broaden BlackBerry’s app offerings and cut costs. The measures have paid off, the company announcing a positive cash flow of $43 million on its December 19 earnings call.

“We will survive as a company and now I am rather confident,” said Chen in an interview with Reuters last November. “We’re managing the supply chain, we are managing inventories, we are managing cash, and we have expenses now at a number that is very manageable. BlackBerry has survived; now we have to start looking at growth.”

One of Chen’s most important initiatives has been to keep plugging away with devices, in spite of the Z10 and Q10 disasters. BlackBerry phones might not be popular with consumers, but new devices like the Passport and Classic are built with enterprises in mind, and by all accounts they’re proving to be very popular. The Passport (above left) is currently the highest rated smartphone on Amazon.com, and both Amazon and Shop BlackBerry appear to be having trouble keeping the device in stock. While BlackBerry hasn’t released any recent sales figures for the device, it reported 200,000 pre-orders when it went on sale last September.

BBM to show a profit?

 

A lesser-known success is BlackBerry Messenger (BBM), the company’s proprietary messaging platform. Considered an als0-ran when it was exclusive to BlackBerry phones, the service has exploded since being expanded (after a few stops and starts) to include Android, iOS and Windows Phone clients. BBM subscribers now total over 140 million, up from just 20 million one year ago.

Suddenly, it’s looking like BBM could become a nice earner for BlackBerry, as this chart illustrates:

BlackBerry Messenger

BlackBerry reportedly plans to charge for premium services like BBM Protected, which offers secure messaging, and BBM Meetings for mobile collaborations. The company also plans to offer paid subscriptions to consumers covering premium features like ad-free usage. Add to that the money from advertising and stickers (from $0.99 to $1.99), plus services like BBM Banking in India, BBM channels, and some 175 million visitors to the BBM shop, and BBM could hit the $100 million in revenues company chiefs are hoping for in 2016.

No one does enterprise security better

 

Perhaps the most compelling strength BlackBerry has is its security expertise. BlackBerry Enterprise Server 12 (BES 12) was released last year and has been positively recieved. BlackBerry has long been synonymous with enterprise and security, and analysts say that with BES 12 it took an exceptional product and made it even better.

“Detractors of BlackBerry should note that unlike Sony, no BlackBerry Enterprise-using company has reported any serious security breach this year,” wrote researcher Andy Alcarez in Seeking Alpha.

BES 12 represents a significant opportunity for BlackBerry. Strategy Analytics says more than 600 million smartphones are used by businesses around the world, but the vast majority of these are not connected to any formal mobility management solution.

According to Holger Mueller, principal analyst at Constellation Research, many enterprises still recognize BlackBerry as a leading player in security. “Blackberrry is in a much better shape at the beginning of 2015 than it was twelve months ago, as security needs are more present in enterprises than ever after the fallout of Target, Sony and others,” said Mueller.  “Twenty fifteen will be key for Blackberry if it can convince enterprises to adopt its security and device management software that it has invested to bring to all key platforms.”

BlackBerry has a golden opportunity to become the dominant provider of enterprise mobility management, wrote Chris Umiastowski, growth investor for Globe Investor’s Strategy Lab, in the Globe and Mail. “Instead, it seems that BlackBerry, under the leadership of CEO John Chen, could be emerging as a high-growth, enterprise software company,” he wrote.

“There are far more iPhones and Android devices than there are BlackBerry smartphones in the business world, and BlackBerry can now sell a single solution to help IT departments manage their whole fleet of mobile phones and tablets,” Umiastowski continued. A 14-year investor in the company, Umiastowski said he believes that “with solid execution, BlackBerry could grow to $10-billion in annual software and service.”

And no one does IoT security at all…

 

BlackBerry IoT platformNow BlackBerry is targeting the Internet of Things (IoT) with a new platform announced at CES last week that PC World reported “combines QNX embedded software with BlackBerry’s secure network infrastructure and device lifecycle management.” The platform provides a message bus with instantaneous data indexing and storage that can validate “every action, message and piece of data.”

BlackBerry seems uniquely positioned to succeed in the IoT because it already has the infrastructure in place to keep pace with the rapid expansion of devices that analysts expect. At its CES launch, the company said its global data center network currently handles about 35 petabytes of data each months and has peering connections with more than 300 mobile operators.

“We believe that BlackBerry’s strategy of beginning with the automotive and industrial sector is a step in the right direction, given that the company has strong credibility with enterprise customers,” wrote a team of analysts from Trefis.com in a recent Forbes article. “BlackBerry’s solid reputation for security could also provide a competitive advantage as security has been a concern in the IoT market.”

A $14 Billion Market

 

Did we mention cars? BlackBerry just so happens to have a big stake in those too, thanks to its QNX embedded system that powers the infotainment and telematics systems in more than 50 million vehicles around the world. QNX connects a vehicle’s entertainment systems, climate controls and navigation to dashboards sold by other companies like Apple’s CarPlay and Android Auto.

According to research outfit Markets and Markets, QNX owned 53 percent of the embedded vehicle OS market in 2013, while Microsoft trailed in a distant second place with 27 percent. Moreover, QNX’s share is likely to increase now that Ford has announced that it will ditch Microsoft for QNX. Ford apparently sees value in being both agnostic and secure. “We’ve always said we don’t want you to be making a purchase decision about your $30,000 automobile based on a $200 smartphone,” said Ford CTO Raj Nair in an interview with CNET.

How much is this market worth to BlackBerry? Markets and Markets reckons the global auto infotainment sector will be a whopping $14.4 billion business by 2016, though most of that cash will go to hardware makers. Even so, BlackBerry, which currently makes around $3 per vehicle from QNX licensing fees, could soon be in a position to negotiate higher licensing fees if its market share gets any bigger.

What isn’t clear is how strong a force the revitalized BlackBerry will become, but those who were predicting the company’s doom this time last year are eating crow. The company that couldn’t even find a buyer for in the summer of 2013 is undergoing a complete transformation, and people are beginning to take notice.

“I recall a year ago when I first started I was watching CNBC and one of our competitors was making fun of us,” Chen said in a recent interview. “My advice to competitors is that we are not only a point product company, we are an EMM [Enterprise Mobility Management] solution, very broad and very deep. They need to understand that. They need to work for a living rather than make fun of us.”

photo credits: Sebastian Anthony via photopin cc; vernieman via photopin cc; AV Dezign | www.avdezign.ca via photopin cc


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