Thorsten Heins, CEO of BlackBerry, floated the idea of selling its manufacturing arm in an interview with Die Welt. It also floated the possibility of licensing its operating system.
Then Lenovo made a public announcement floating the possibility of acquiring BlackBerry to see how governments would respond. One Canadian government official said he would prefer that RIM grow "organically," which means he doesn't approve.
RIM sells a lot to the U.S. and Canadian government, so any purchase would get a lot of scrutiny. The Economist had a cover story about Huawei recently. There is a lot of concern about Huawei, another seller of cell phones, being the front man for the Chinese military, and that it could rack up significant intelligence if the software can be jiggered to its advantage. Same would go for Lenovo with BlackBerry 10.
BlackBerry (BBRY) had a clear advantage when you could read emails on the phones when other phones had no email access, but has had problems ever since iPhone and Android phones made their appearance.
First off, how is BlackBerry 10 going to get around the notorious apps gap issue? With so many apps already written for iPhone or Android, how can BBRY keep users happy? Well, it seems it has a clever solution for that, which is that it has an Android runtime program that will run Android programs until the popular programs can be written in the native BlackBerry operating system.
Could BlackBerry Sell Off Its Manufacturing Arm?
As noted, Thorsten Heins, CEO of BlackBerry, recently floated the idea of selling its manufacturing arm in an interview with Die Welt. At the same time, he also floated the possibility of licensing its new operating system, BlackBerry 10.
Then Lenovo made a public announcement floating the possibility of acquiring BlackBerry, probably with a view to see how governments would respond. One Canadian government official said he would prefer that BlackBerry grow "organically," which means he doesn't approve.
BBRY sells a lot to the U.S. and Canadian governments, so any purchase would get intense scrutiny. The Economist had a cover story about Huawei recently. There is a lot of concern about Huawei, another seller of smartphones, being the front for the Chinese military, and that it could rack up significant intelligence if the software could be jiggered to its advantage. Same would go for Lenovo with BlackBerry 10.
There have been a number of stories in the press about the Chinese military hacking into newspapers, the New York Times and the Washington Post. And this will not help, though apparently this hacking goes on all the time, and the U.S. and the NSA do their share also, with one commentator (Michael Riley of Bloomberg Businessweek) on Charlie Rose suggested that 75% of what the President sees in his daily security briefing comes from cyber spying.
This will probably militate against the acquisition of software firms, but will this also apply to hardware firms? After all, Lenovo already sells computers and smartphones in the U.S. On the face of it, I don't think this presents the same issue. So, it may be that a sheared off manufacturing arm could be bought, and if Lenovo qualifies, then maybe Huawei would also qualify, and then you have bidding possibilities.
Thorstein Heins seems to have anticipated a sheared off manufacturing arm, and as I said above, he is thinking about licensing BlackBerry 10. This I rate as a plus. Apple (AAPL) is going down the cul-de-sac of its exclusivity, and ultimately, it may not matter how many apps it has when customers have decided to go elsewhere to save money, or like the look or feature of some other cell phone or tablet. Think of it, how many of your apps are really crucial?
But if Thorstein Heins does decide to license BlackBerry 10, it seems he will be facing a headwind of new competition.
Firefox, which apparently feels it needs more than just a browser, put on a demonstration at the World Mobile Conference in Barcelona of its new mobile operating system called Firefox OS, which is to come out this summer.
It plans to target emerging markets not already saturated with Android phones. So, Firefox said that handsets using the new operating system will be available in Brazil, Colombia, Hungary, Mexico, Montenegro, Poland, Serbia, Spain and Venezuela during 2013. Seventeen different carriers will provide the hardware from Alcatel, LG and ZTE.
Firefox in pinning its competitive advantage on creating an open systems environment even easier to work with than Android.
WebOS is a product developed by Palm. That operating system, also based on a Linux kernel, went to Hewlett-Packard (HP) when it acquired Palm for $1.2 billion in 2010. HP looked like it was going to get into the tablet business, but then pulled the plug.
But in the new musical chairs game of operating systems, now along comes LG a few days ago, saying that it is interested. It is not immediately going to use it for cell phones, but will use the operating system in smart TVs and appliances.
Windows Phone 8
While Blackberry is in full-fledged crisis, Microsoft (MSFT) is in existential misery, which may, like the national debt, someday come to crisis.
Microsoft, which toyed with a tablet years ago, was left in the dust when it came to mobile operating systems. This could be seen as a complete and abject failure for Steve Ballmer because operating systems have been the lifeblood for Microsoft, but...
But one has to remember that Microsoft is famous for coming from behind, which it has done over and over. Raise your hand if you remember when Lotus 123 was eventually vanquished by Excel? Or when Microsoft eventually creamed Apple in the graphical operating systems horse race with Windows? Or take Novell, which was well ahead in office networking, only to be left withering on the vine by MSFT? Or how about Netscape, which was overwhelmed by Internet Explorer?
But oops, that was back when Bill Gates, brilliant and über competitive leader of Microsoft, was at the helm. That was when Gates could lever the operating system to kill Netscape and Novell. But what if you don't own the operating system?
Ballmer has to figure out how he is going to replace all that cash flow, which will dissipate as people segue from laptops to tablets; that's the scary problem. He cannot count on the apps business like he could because now Google is offering all manner online alternatives, and I myself discovered Oracle's Open Office when I couldn't open one of Microsoft's docx files. What I mean to say is that users have options.
Windows 8 operating system for smartphones is primarily represented by Nokia (NOK), which gets a $307 million payment every quarter to try and get traction for his product. So, for now this is very far from a breadwinner for Microsoft.
What else could Microsoft do? Would it pay BlackBerry $10 billion, let's say, to gain 79 million users, and add a second operating system to the portfolio? Seems redundant. Would it want to get into manufacturing handsets?
Meanwhile, Ballmer has placed a gigantic bet ($8.5 billion for Skype) on grabbing all the telephone business away from AT&T (T), Verizon (VZ) and Sprint (S), in the U.S., and from Deutsche Telekom, British Telecom, and every other telecom on the planet hoping to cash in one last time with its huge base of Windows subscribers. The question is: could that base be a sinkhole? It's exciting times. It feels like Microsoft has mate in two moves, but the rest of the world - Google (GOOG), Apple, Samsung, all the telecoms in the world - has mate in one.
So far, the telecom companies have been happy enough since they make money from internet subscriptions. But once Microsoft tries to charge for its services, these competitors will step up and compete with Microsoft head to head and service for service.
It remains to be seen if these telephone companies will have an advantage like Microsoft had with its operating system with its investment in fiber optic cable and air wave spectrum, but I wouldn't rule it out.
Google's Android and Apple's iOS dominate now, with 90% of smartphones, but will this domination continue? It is a comfortable thing, a normal human thing, to think that the current situation will continue into the future, but I would not count on it. It was not so long ago that Symbian was the number one smartphone platform, but now it seems to be dropping out.
Google's efforts to protect its patent portfolio may backfire big time
Certainly, Samsung does not count on everything remaining as is. It is necessarily nervous since its main operating system, Android, is owned by Google, which has bought a competing handset maker in Motorola Mobility. And while Google ostensibly bought Motorola Mobility to acquire 17,000 patents, it looks like there will be consequences.
So, Samsung is holding in its back pocket Tizen Mobile OS. Tizen is the brainchild of Samsung and Intel, which previously was called MeeGo, and was itself a former collaboration of Intel's with Nokia. And as it consolidates its efforts on an operating system, Samsung is merging its own previous efforts, called Bada, into Tizen.
Tizen is again built on the Linux Kernel. Tizen uses the Webkit runtime, and could possibly be used in everything from smartphones to smart TVs, and everything in between - cars, smart household appliances. Samsung says it will be offering a smartphone with Tizen sometime this year, but it is not clear whether this is a real alternative, or just business insurance.
As the smartphone/tablet listing below shows, Microsoft may also benefit from this nervousness on the part of handset makers about Google and Motorola. BlackBerry may also benefit from this nervousness if it decides to license its system.
Alcatel - Android, Windows 8, Firefox OS
Apple - iOS
BlackBerry - BlackBerry 10
Huawei - Android, Windows 8
HTC - Android, Windows 8
Lenovo - Android, Windows 8
LG - Android, Windows 8, Firefox OS, perhaps in the future webOS
Motorola Mobility - Android
Nokia - Windows 8, (Symbian being phased out)
Samsung - Android, Windows 8, Tizen
Sony - Android, Windows8
ZTE - Android, Windows 8, Firefox OS
BlackBerry is speculative buy based on the possibility of a breakup, or from licensing its operating system. Nokia is a speculative buy based on its emerging market focus. Microsoft is neutral. Google's main business is search, so we are not offering any opinion. Apple is neutral because of the size of the business. All telephone companies neutral based on their internet provisioning, negative on the telephone end of the business until we have some clarity about how they will meet the threat of Skype. No telephone company except Rogers Communications (RCI) in Canada has addressed the Skype threat. Rogers is an innovative company, which we favor, but the stock price is quite high, so we are neutral.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.