Commentary

BlackBerry Disconnects Consumer Market

Ontario-based BlackBerry, the company that controlled more than half of the smartphone market in the U.S. before it was known as the smartphone market and when it was still called Research in Motion, announced on Friday that it had more than $1 billion in unsold inventory and is canceling it commitment with the consumer market to focus on its mainstay business customers.

It is also laying off an additional 4,500 employees — 40% of its current workforce — and is seeking a buyer with the help of both J.P. Morgan Chase & Co. and Perella Weinberg Partners, according to the Wall Street Journal.

“Chief Executive Thorsten Heins worked for the past two years to get BlackBerry back into the race, fine-tuning a new operating system and focusing the company's development efforts on a pair of devices he hoped could hold their own with popular competitors like the iPhone,” write the WSJ’s Will Connors and Sharon Terlep in an earlier story. “But the company now acknowledges those efforts have fallen flat.”

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Once seemingly destined to be the Xerox or Kleenex of its category, its overall market share has dropped to less than 3%, according to IDC data. 

BlackBerry is “taking a writedown of as much as $960 million for unsold inventory of its Z10 phone — a touch-screen device unveiled in January as its answer to the iPhone,” reports Bloomberg’s Hugo Miller.

“It’s the end of an era: BlackBerry as we knew it is over,” BGC Partners analyst Colin Gillis tells Miller. “They’re refocusing on a much smaller niche enterprise-focused company and that’s a reasonable strategy for them.” Reasonable or not, he recommends selling the stock, which dropped 17% on Friday and has fallen 98% since 2008.

Analysts tell CBC News’ Mark Gollom that the new phones were “a little too late in response to a smartphone market where many consumers have already placed their loyalty with other brands. “Patient in intensive care, consider do not resuscitate order,” Seaboard Group analyst Iain Grant emailed, he reports.

BlackBerry’s weakness has been in its apps. The company “failed to see the key change in its market: the emergence of software capability — trumping hardware features — as the driver of consumer handheld purchases, writes John Shinal in USA Today

“When it led the smartphone market almost a decade ago, BlackBerry was sold primarily to corporate customers who liked its reliability and security — and the fact that if there were a problem, the user usually had a corporate IT service guy to fix it,” Shinal continues.

“It's worth noting that BlackBerry isn't the only casualty of the of ‘highly dynamic’ smartphone and mobile OS market,” blogs the Washington Post’s Andrea Peterson. She points to a comScore chart that shows “every major smartphone platform from early 2007 has become a practical non-entity since the rise of Android and iOS.” 

BlackBerry says it will reveal more about its new sales strategy when it releases its quarterly earnings statement on Friday. But the move “away from consumer [is] unlikely to stem [its] decline,” according to a Reuters’ — in a headline, no less.

Its “plan to retreat from the consumer market in favor of its traditional strength serving businesses and governments is widely seen as a desperate move that industry watchers warn will only accelerate its downward spiral,” writes Alastair Sharp.

"Perception is nine-tenths of reality and if customer and supplier confidence continues to fall, it doesn't matter how much cash they have on the balance sheet,” GMP Securities analyst Deepak Kaushal tells Sharp. “Things could get worse." 

Thanks to the trend toward “Bring Your Own Device” in the business market, BlackBerry’s North American share has plummeted from nearly 70% in 2010 to 5% and global share has slipped to around 8% from 31%, according to IDC figures, Ryan Knutson, Clint Boulton and Will Connors report in the Wall Street Journal.

"It's been a no-brainer for us to embrace a model which provides our workforce their own personal preference for their mobile devices," as one CIO tells them. 

Adding to the company’s woes, over the weekend it “was forced to suspend the rollout of its BlackBerry Messenger (BBM) to iPhone and Android platforms after experiencing glitches” caused by an unreleased version of BBM for Android being posted online, Nitin Puri reports on ZDNet. On the bright side, it did have “1.1 million active users in the first 8 hours.”

Indeed, the BlackBerry still has it fans but they tend to skew a lot older, and lot less with it than, say, your average middle schooler. Last week, I heard a 60-something attorney use the term “PDA.” 

“I haven’t heard that term in about 10 years,” I said.

Don’t you know he had a BlackBerry in his breast pocket? At least it wasn’t a pocket protector.

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