BlackBerry (BBRY) is holding its annual Blackberry Live event in Florida next week. It is likely to see the launch of BlackBerry Enterprise Service 10.1 (BES 10.1) with support for iOS and Android devices with outstanding features, some of which have been leaked on the internet.
BES 10.1 is important, providing its enterprise customers a secure way to manage bring your own device (BYOD) with the need for virtual private networks (VPN). By employing Blackberry's Secure Work Space service, iOS and Android devices can operate through Blackberry's Network Operations Center. VPN use tends to penalize battery life in handheld devices on the network. Blackberry's Secure Work Space service includes its "Docs to Go" software, an added benefit compared to competitive services.
In parallel, BlackBerry might be ready to port its BlackBerry Messenger Service (BBM) to other devices. Most analysts have focused their attention on the Z10 and Q10 smart phones which have received a strong reception by most accounts, but have ignored BlackBerry as a software supplier for secure enterprise communications even without the phones. As a result, in my view, they underestimate the value of BlackBerry.
For investors, the key question is how much can BES 10.1 contribute to BlackBerry's software revenues? Of course it all depends on the level of acceptance and the rate BlackBerry charges for the service, which itself could affect acceptance. The table below estimates the impact of BES 10.1 for a range of users from 10 to 40 million at monthly fees of from $4.00 to $7.00 and assuming a 75% margin rate on services, showing that the service could add up to $3.4 billion in revenue and as much as $4.71 in earnings per share.
BES 10.1 Potential Impact on Blackberry Revenues and EPS
Number of users (millions)
If 30% of Blackberry's current user base is enterprise and uses BES, there are over 20 million current customers for BlackBerry Enterprise Services. If BES 10.1 only holds the existing base, the impact is likely negative for BlackBerry or at best a wash, depending on how well BlackBerry can maintain its monthly fee and whether the existing customer base will expand its total user base through growth of iOS and Android as well as BlackBerry devices. But the market for enterprise is much larger than BlackBerry's existing users and the BES software has features which make it a top choice for corporations.
I believe BlackBerry has a strong chance of success not only to retain its existing enterprise customer base but to expand it broadly as enterprise customers realize they can have the security of BlackBerry while allowing their employees flexibility in choosing their own devices. The addition of BBM across all platforms could be an additional benefit.