BlackBerry (BBRY) has performed quite impressively in effecting a turnaround in its declining fortunes. The company has generated a buzz in the market by introducing some top smartphones based on a brand new operating system, BB10. The new management has been on the ball with regard to product execution, media promotion as well as introducing new services. The company's decision to introduce the BB10 low-cost smartphone to replace the aging Curve line is also a timely one. BlackBerry has already started a new cheap data plan for India in the last month. Now the company has come out with an "EMI" plan, like its rivals, to boost sales. However, the advertisement budget remains low and the company is not giving a "cashback" or an "exchange" offer like Apple (AAPL) or Samsung (SSNLF.PK). The reason is that BBRY cannot match the money power of its bigger competitors. Despite this, I remain optimistic about BBRY's stock, given its cheap valuation and its attraction as an acquisition target.
Indian Smartphone Market Sees Entry of Bigger, Less-Known Smartphone Competitors
The global smartphone industry has become viciously competitive in the last two to three years. Most smartphone stocks like Apple, Nokia (NOK), etc. are trading at depressed multiples due to the stiff competition. The market has also become more globalized, with emerging markets being the real engine of growth. India is the second largest mobile phone market in the world after China. Though the smartphone penetration is very low, the smartphone growth rate in India will be more than 50% in the next few years. Apple has started putting a serious effort into sales and marketing in India. The company started the first non-Apple product exchange offer for iPhone in India. Samsung saw its market share in India surge to almost 50% in Q1 2013, as it unleashed a marketing blitzkrieg. Panasonic, which is a non-entity in the non-Japanese smartphone market, is targeting 8% market share (from 0%).
The Chinese telecom giant ZTE plans a big push in smartphones even as it cuts Indian jobs in the core telecom equipment segment. Nokia has got a strong marketing and distribution network in the country along with a high brand recall. Nokia has not announced a discounting plan on its Lumia or Asha range of phones as they are already considered great value buys by customers. However, the lack of discounts does not mean Nokia does not consider India a key market. It launched its newest Asha 501 phone in India first due to the importance of India in its global plans.
BlackBerry Has Lost Ground in India
BlackBerry has become a marginal player in the Indian market as the company lacks the star power of the iPhone and does not have any new lower priced smartphones. The cheap data plan introduction was done to stem the market share losses that the company is facing. The "Curve" line of smartphones had become very popular in India and BBM had become a "must have" service for India's upper middle classes. But lack of innovation and marketing push in the last year has led to people substituting BBM with "WhatsApp." With BBRY now deciding to make BBM freely available on Android and iOS, one of the main reasons for buying BBRY phones is gone. BlackBerry has now belatedly started an "EMI" financing scheme for its "Curve" and "Z10" smartphones in India (Q10 has not been launched). However, Curve has become too old to generate any interest among youngsters, while Z10 remains too expensive for most. While Apple and Samsung are giving full page ads in India's leading newspaper, BBRY has only been able to afford a quarter page advertisement.
BlackBerry Z10 is Now Available at an EMI offer of just Rs 4,799. BlackBerry Z10 current market price is 43,200 and now Blacberry is offering Z10 in easy EMI offer at monthly payment of just Rs.4,799.The EMI offer states that you can own a new BlackBerry Z10 at 0 down payment, 0% interest, 0 processes fee and on 9 easy monthly installments of Rs 4,799.Currently the EMI offer is available on leading credit cards like American Express, Axis Bank, Citibank, HSBC, ICICI Bank, Kotak, SBI and Standard Chartered.
BlackBerry Does Not Have Too Much Time
BlackBerry has already fallen behind in India due to lack of new product launches. The loss of its Indian CEO was also a bad blow for the company in the middle of a turnaround. Recent efforts in introducing a cheap data plan, and an "EMI" scheme shows that BBRY is trying hard. However, it will be difficult for BBRY to make inroads against powerful players like Apple and Samsung. The company needs to introduce its new cheap BB10 smartphone fast, otherwise it will quickly fade from the customer memory.
BlackBerry is trading at a low valuation like other smartphone/mobile stocks such as Nokia and Samsung. The BBRY stock remains one of the most volatile stocks in the technology space, though it has stabilized somewhat in the last one month (~$14-16 range). The stock has given ~24% return in the last one year, though it has lost 90% of its value over the last five years.
Smartphones have become biggest technology growth driver in the last few years due to tremendous innovation. Older companies like BBRY and Nokia have seen their leading position being overtaken almost overnight by Apple and Samsung. Both the companies are making a strong effort to regain their places in the smartphone industry. It will be very tough given the scale and size of their competitors who are not going to easily relinquish their hold over this massively growing industry. Samsung has got good products and a huge marketing budget. Apple remains the top brand for consumers, while Chinese and Japanese electronics giants are trying hard to enter the smartphone industry. BBRY has impressed with its recent performance, but the company needs to do much more in order to survive. The company will need to launch great products in order to match the marketing heft of the bigger players.