In five years I don't think there'll be a reason to have a tablet anymore
As a BlackBerry investor, this is not necessarily a comment I want to here coming from the CEO of the company. At its core, the comment flies in the face of plenty of research and current market dynamics, where the tablet is essentially destroying the role of the traditional PC inside the home of a consumer. Mr Heins went on to say the following with regards to tablets:
tablets themselves are not a good business model
Again, this comment bothers me as a BlackBerry investor because frankly it is an ignorant and inaccurate statement. Tablets arguably have not been a good business model for BlackBerry, or just about any company not called Apple (NASDAQ:AAPL), but the volume of tablet units sold proves the product is successful. For Apple, the success lies in the profit generated for each tablet sold. For others such as Google (NASDAQ:GOOG) and Amazon (NASDAQ:AMZN), the success is measured by further integrating their core product into the life of a consumer, not in actual profits realized from selling the tablet hardware itself. Unfortunately, these statements give me pause about the man leading the turnaround effort for BlackBerry which ultimately makes me question my investment in the company.
The Importance Of A CEO In Touch With Reality
If you need any example of the importance of a CEO who understands the marketplace his or her company operates in, you need only look at the past co-CEO of BlackBerry. Jim Balsillie, along with Mike Lazardis, basically built BlackBerry into what was once the predominant smartphone company in the entire world. Then a little innovation called the iPhone hit the market. This was 2007, and at the time, Mr. Balsillie had this to say about the iPhone:
As nice as the Apple iPhone is, it poses a real challenge to its users. Try typing a web key on a touchscreen on an Apple iPhone, that's a real challenge. You cannot see what you type
Follow the link here for more great quotes from the former CEOs of BlackBerry and you will wonder how they lasted as long as they did. The quote above was from late 2007. Can you imagine where BlackBerry would be now if it did not take them until 2013, over 5 years, to introduce a phone that actually could come close to offering the same experience as that found in the iPhone?
The same argument could be made for Apple CEO Tim Cook, and his seeming annoyance around questions on earnings conference calls about whether Apple should build a bigger iPhone. The consumer has voted with their wallet, and there is unequivocally a market for a phone larger in size than that of the iPhone 5.
The point is that what CEOs say when they are not talking in a scripted presentation provides a giant glimpse into what they believe in terms of their business. In this case, Thorsten Heins is standing alone on an island with his belief about tablets.
Why The Comments Concern Me
Researchers can always be wrong, as they were just a few years ago, when not a single source was on record predicting the decline of the traditional PC that many are now predicting. Today, Gartner estimates that the annual sales of tablets will increase from over 100M in 2012 to more than 400M in 2017. This is a phenomenal growth rate and comes from one of, if not the most, respected technology research firms. This estimate also flies directly in the face of what Mr. Heins seems to believe.
What is most concerning is that either Gartner is wrong, or Mr. Heins is wrong. In this case, I think it is best to assume Mr. Heins is wrong in analyzing how his belief could impact my investment in BlackBerry.
With regards to the BlackBerry presence in the tablet market today, the comment by Mr. Heins is not concerning as the BlackBerry presence in the tablet market might come as a surprise to all but the hardcore BlackBerry fans. It is somewhat concerning, however, with regards to future BlackBerry plans for this market. Various rumors and leaks have led to speculation that BlackBerry will release a BlackBerry 10 operating system tablet in the near future. It does not inspire much excitment about this product, considering that Mr. Heins believes the tablet market is headed towards extinction.
What concerns me the most is that Mr. Heins might be dead wrong about the device market, in which BlackBerry competes. Clearly, his statement is not naive in the sense that he believes personal devices that can provide a tablet like experience will not exist in the future. Most likely, he is alluding to the smartphone having a bigger role in the future and being capable of providing the same type of experience that a tablet provides today. This is a questionable assumption in my opinion as the success of the mini iPad would bear out. Will the tablet form factor simply get smaller and smaller or will smartphones continue to grow in size, making Mr. Heins prophetic with his observation? Today, the jury is out, but Mr. Heins is not in great company with his prediction regarding the future of the tablet market. As a BlackBerry investor, I hope this is just a personal opinion, and not the driving force behind the future innovation from the company.
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.