Does this weekend's unabashedly glowing review of the BlackBerry (NASDAQ:BBRY) Z10 mark an inflection point in this brand's revival? Long left for dead by even its most avid users, BlackBerry has been furiously working to right a fast sinking ship. The results seem to be paying off in numerous reports of brisk sales and mentions like this one in London's FT:
"Within 30 seconds of picking it up, I felt as if I had the iPhone 6 in my hand. Running iOS 7. It is an awesome phone, with a pleasing new operating system, BB10...could have the folks at Cupertino gnashing their teeth, because whatever iPhone upgrade they launch later this year or next, it will surely struggle to catch up."
Could BlackBerry have ever hoped for a warmer response from the mainline financial community press? Could BlackBerry have created a product which such draw that it can pull users away from iPhones and Samsung (OTC:SSNLF), as BGR uncovered in this article over the weekend: "BlackBerry Coup Confirmed: iPhone, Android Users Make Up Half of Z10 Sales.."
How did BlackBerry achieve this turnaround and where does it leave vs. its rivals?
From Burberry to BlackBerry, Great Brands Die Hard
Living in London, we witnessed the slow demise of the Burberry (OTCPK:BURBY) brand in the late 90s. Once known for its fashionable raincoats and chequered grey and tan argyle patterns, the brand fell to the point that buses of Japanese tourists would pass by without even the turn of a head or flash of a camera. Though this brand had essentially disappeared for a few years, it still had a broad base of users who associated great memories with the brand. Burberry had managed to leave a permanent, chequered argyle-imprint in the 'collective consciousness' of its followers.
Please see the following excerpt from an interview Angela Ahrendts, Burberry's CEO, gave to the Harvard Business Review last month:
"From Apple (NASDAQ:AAPL) to Starbucks (NASDAQ:SBUX), I love the consistency - knowing that anywhere in the world you can depend on having the same experience in the store or being served a latte with the same taste and in the same cup. That's great branding."
Burberry returned to its users with classics, items that conjured up the past that its users had enjoyed. BlackBerry followed a similar strategy.
What was the DNA of the BlackBerry Brand That Made It So Popular?
The phone worked and did what it was supposed to do easily. It made calls, emails, and at its heart had a great thing called BBM that enabled users to chat without calling. It was simply a communicating device that was intuitive and easy to use for all.
The user experience was painless, but unfortunately it was limited. With the onset of the smartphones, the BlackBerry was simply left behind rotting, with a stale OS that couldn't be stretched into the next decade.
If You Think the FT Article is Just a Lucky Break?
Think again. As the ship was listing heavily and shares plummeted into the abyss, the founders threw them a few lifeboats:
-They hired Don Lindsay who had spent ten years at Apple as design Director for the Mac OSX User Experience Group
The BlackBerry OS team delivered nothing less than a master class in UI design. Once a user learns to use the Z10, it becomes as smooth as silk and results in cooing columnists. The entire OS can be used with just the thumb. No more poking at menus (Android) and finally, thanks to QNX, true multitasking. The ease of navigation that just 'Flows', and a HUB where users can 'Peek' through various feeds and emails any time.
BlackBerry went back to the basics and delivered a device that focused on ease of use, the bedrock of its brand. That strategy, if anybody doubts, is how Apple dominated the world by crushing Windows with MAC OSX to other mobiles with IOS.
BlackBerry hit a bulls eye with the consumers by focusing on UI. How much of a bulls eye? Have a look at this recent Yougov Poll "Phone users planning to upgrade value 'ease of use' the most."
The Mobile Brand Landscape
Make no mistake: Buying a mobile is a decision to associate yourself with that brand. That phone is visible in meetings, restaurants, and on dates. It says something about you. Here is my opinion of the current brands:
As a brand based in an open source platform, Android suffers from a highly fractionalized user experience. Android's clumsy UI reliance on menu and settings is eerily similar to Windows vs. Mac. The poky nature of Android is just plain painful, but Android compensates for this by offering users a far freer and unshackled experience to the iPhone.
From a business appeal, no matter what you hear about Samsung's Knox, Android is an open-based platform on which you can load virtually anything. This will never be as safe as a closed OS. Nothing can ever patch this Achilles heel.
Lastly, any brand that ends in 'roids' can only conjure a certain unpleasantness in "the great collective subconscious."
Microsoft WP7-8: The Brand of Death
Unfortunately, Microsoft (NASDAQ:MSFT) branding is forever tarnished by its user's experience with Windows. Basically, in the great collective consciousness, this brand's interaction with its users is about as memorable as a dental visit. If you have any doubts about the dismal failure of this mobile platform, just listen to Microsoft Chairman Bill Gates condemnation here on CBS recently. You should then ask yourself if you have ever seen a Lumia in public outside of a mobile shop?
Essentially paid to commit Sepuku by selling its soul to Darth Balmer of Microsoft.
The only Android brand that has managed to pull away from the Android pack with the successful launch of the Galaxy S3 and the Note 2. Like Apple, Samsung is hitting up at the ceiling of hardware perfection with the S3 and may offer few reasons for its users to upgrade on the hardware side.
Do you really think that Samsung, who clearly showed its uber design skills in software design with the unstoppable uptake of its 'Chaton' app (maybe three downloads?), is capable of delivering a remarkable UI based on a collection of cobbled together software bits Android represents? I believe all one can expect from the S4 is a quad processor that speaks to you.
Clearly the dominant brand worldwide but nevertheless showing cracks in its mobile offering that has made it vulnerable.
-The OS essentially has not been refreshed since its introduction in 2007.
-The hardware is reaching 'peaks of perfection' leaving owners wondering what to upgrade to next as the hardware benefits are marginal and the OS experience is stale. (Whereas the iPad mini can look forward to fantastic iPad mini 'Retina' upgrade cycle, both the iPad and the iPhone have hit a ceiling.)
-When Apple pulled Google's (NASDAQ:GOOG) Maps and YouTube from its App Store it sent a chilling reminder to its users that Apple still 'owned' its devices. The restrictiveness of the OS, the cornerstone of its safety, is also a source of annoyance that can drive users to Androids.
In sum, Apple iOS's lack of update and lack of multitasking has left iOS so old and limiting that Samsung enjoyed this little jab at Apple.
The Brand re-Launch Strategy: Deliberately Delaying the US Launch
Out of the gates the BlackBerry team must have expected that reviewers and financial analysts in the US would pan it. The media had made up its mind: this was BlackBerry and BlackBerry was the walking dead, always to be compared to Palm.
BlackBerry had become a brand people loved to laugh at, a brand users were almost embarrassed to pull out, and a brand that the technology illuminati had left for dead. Woe to anybody who thought differently.
Now that's a pretty dark and lonely place for a brand re-birth!
So BlackBerry launched into its strength overseas in an attempt to build momentum and reverse the tone of discussion in the media. Its current die-hard fans would upgrade in a snap, and maybe even some of the droves of ex-BlackBerry users might return. These would provide the marketing bedrock of positive feedback and viral word of mouth needed to break through the negativity.
Assuming a successful launch in Europe, BlackBerry will then have to pre-announce February units shipped (and that number had better be good) to ride into the US on a tidal wave of goodwill and a new winning image that only a soaring stock price graces you with.
Now keep in mind that BlackBerry counts shipped units as sold. Even worse (for short analysts that is), I believe shipped units can actually be pushed to a designated "shipping" demarcated area in the warehouse. Basically, you need to assume, with all the countries announced thus far, BlackBerry might have been able to ship every single unit made.
How many units did they produce in two months? Numbers vary from 500K per month to over 1M per month. I believe that 1M in two months would be a reasonable figure given that CEO Thorsten Heins has clearly stated the selling was brisk and he had to increase production.
The bear side of the street has 300K units shipped in February and noted bull, Peter Misek at Jefferies, has BlackBerry pegged at 500K. These numbers leave plenty of room for upside surprise if an early announcement was to come.
Notable bears at Canaccord, who are all over the place with this stock, pummeled BBRY on Feb 18th, claiming that their 'Channel Checks' led them to believe that February would result in 300K units shipped. Yet Canaccord this morning seemed to have reversed course and changed this number to 800K units shipped and earnings from a loss of $1.18 to $1.06! (Maybe he reads Seeking Alpha?)
Well, it's bear hunting season in Canada and it looks like Canaccord's clients are first in line, along with those happy investors who followed Wedge Partners, MKM, and Pacific Crest's sell recommendations. I expect to see more reversals in shipped units estimates as analysts realize the foolishness of the '300K unit shipped headline' that served only one cynical purpose: to scare the market to temporarily alleviate the burden of this losing trade for their clients.
The stock was also the subject of numerous takeover rumors last week, no doubt fueled by the indication to the market that Microsoft's own unflattering appraisal of its lack of success in the mobile space.
Investors who have shorted this stock, for the hopes of a few dollars downside left, have taken on earnings risk and MSFT event risk. I much prefer the other side of that trade, and it seems the short analysts seem to be quietly pulling their foot out of the swamp.
Disclosure: I am long BBRY. 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.
Additional disclosure: I am short Wall Street Analysts