BlackBerry 10's Apps Aren't A Problem

Feb.18.13 | About: BlackBerry Ltd. (BBRY)

A big concern that I see from BlackBerry (NASDAQ:BBRY) bears is that the application ecosystem will not be as developed in the beginning as, say Apple's (NASDAQ:AAPL) iOS or Google's (NASDAQ:GOOG) Android. This is certainly true, but I don't believe that this will be a long-term impediment. BlackBerry's advantages, especially for the target audience (professionals/corporate), should allow it to gain traction despite the slightly anemic initial selection of applications. In the meantime, BlackBerry is doing all of the right things to make sure that developers have a fairly seamless experience in porting over their applications.

Developers Like Money

Developers like to actually make money with their products, so it would be foolish to completely neglect a phone ecosystem that has 79 million users lined up and ready to switch to BlackBerry 10 when it comes upgrade time. Further, the initial reviews of the phone seem to be mostly good, although certainly not the overwhelmingly positive reaction that a phone such as Samsung's Galaxy line or Nokia's (NYSE:NOK) Lumia line frequently get at the review houses. BlackBerry 10 is viewed as a solid phone that should represent a solid evolution for fans of the unique features of BlackBerry (security, the keyboard, etc.), so I see no reason to expect this phone to actually flop as some have suggested.

Now, BlackBerry actually provides tools to aid developers in porting over both iOS apps and Android apps to its own BlackBerry 10 platform, so while developers will still have to do some legwork to move their programs over, the barrier to entry is quite low and I expect that apps developers will be stumbling over each other to be the first on the lot with fresh new applications for the new BB10 users. After all, if you're there before the other guy (especially since the Android/iOS markets are crowded with very similar apps), then you can make some serious money. Do not underestimate the carrot of a "new" ecosystem for developers actually trying to make a buck in this highly competitive world.

Apps Aren't That Complex

Smartphone apps aren't all that hard to write compared to some very complex high-performance computing software, or perhaps a triple-A 3-D game. These are $0.99 - $3.99 programs that have to be amenable to a small screen, short attention spans, and fickleness. Spending 4 years writing an epic game for a phone, only to see 10,000 downloads isn't exactly the most enticing proposition. The development cycles for these things are short, updates come fast, and they need to be developed cheaply.

Put quite simply, it's not all that hard to have a bunch of developers put out a slew of apps for a new platform. It'll take a few months, but pretty soon, there will be more apps available than any person would reasonably expect to download over the lifetime of his/her phone. This, of course, brings me to my next point.

1 Million Apps? Wow, I Need All Of Them!

When Apple brags about 1 million apps available at the iTunes store, and people go on to cite this as an impenetrable moat that nobody else can overcome, it strikes me as a bit odd. The major software houses will port all major applications to every available mainstream platform for profit's sake, so the risk of not having a Netflix (NASDAQ:NFLX) app available in the long run is simply a non-issue.

Sure, will you get every 15 year old's silly app that they wrote for Android? No, but what are the odds that you would have wanted that in the first place? The point about app count is simply moot in light of the fact that the developers that make worthwhile products will almost assuredly take advantage of a potential revenue stream for what is very likely minimal cost to port. Really, this argument is tired and quite frankly, irrelevant past the initial product's release.

Does This Guarantee BlackBerry's Success?

Well, no. Predicting consumer behavior is nearly impossible. Selling a consumer electronic product such as a phone is as much an art as it is a science. There are phones that, in every meaningful metric, outstrip the iPhone, and yet none of them come close individually in terms of sales figures. On the flip side, there are some beautiful, interesting, and technically competent phones that most consumers wouldn't give a second glance to if they were to see it at the Verizon (NYSE:VZ) store.

On one hand, people like things that are different/cool, so there might be an unexpected torrent of sales due to the fact that the BlackBerry 10 platform is new. Some people may have a love and/or hate relationship with BlackBerry, some pining for the resurgence of this classic brand, and other feeling "betrayed" that Apple, Google, et. al. rendered their favorite smartphone brand obsolete.

This is why I tend to stick to investing in component companies rather than full device companies: it is nearly impossible to know what will sell and what will not solely based on the quality of the product, but in the component space this is much easier to figure out. BlackBerry 10's platform is pretty neat, and it'll gain some traction.

However, it is far, far too early to make the call on BB10's success or failure either way, and as such, be very careful of being excessively bullish or bearish on the stock. Watch the earnings reports, read about market share trends, and visit your local stores to see just what's selling and what's not.

But I will say that if BB10 fails, it won't be because of "lack of apps" -- it'll be because the customer just fundamentally did not like the products built around the platform.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.