Back before the financial crises, BlackBerry (NASDAQ:BBRY) was once a mobile phone juggernaut that nearly controlled its entire segment. Well, I'm sure it's plain to see what's happened since, but just how did this once great and profitable company screw up so badly? In essence, two companies rose to fill the needs of constantly changing consumers' wants and needs.
I give Apple (NASDAQ:AAPL) most of the credit for dethroning BlackBerry's dominance. While Apple is now on its sixth generation phone (iPhone 5), it didn't really take market share until the 3g (2nd generation) was released. The first iPhone was a bit of a dud because the company originally charged an arm and a leg ($599) for an 8gb phone that was only released on AT&T (NYSE:T). This price was unsubsidized for a while, and consumers simply weren't ready to pay up. A bit later, Apple realized this and gave an iTunes gift card for early adopters to try and even the playing field. The iPhone 3g perfected Apple's vision of a mobile web browser, music player, and phone, with a great and responsive screen. It also got pricing correct this time.
Consumers moved to the phone in droves as they preferred a phone that had a larger screen for media as opposed to the smaller screen BlackBerry offered with a great qwerty keyboard. In addition, websites/apps simply worked better on the iPhone. Major websites like YouTube simply looked horrible on a BlackBerry. In addition, the app store was something consumers found to be a great addition that BlackBerry didn't have at the time.
BlackBerry's move to counter this rise was the BlackBerry Storm. Although it was a great looking device, it simply wasn't as responsive as the iPhone and was a push-screen phone. Consumers quickly realized this and stuck with the now rising phone king, Apple.
In 2009, Google (NASDAQ:GOOG) decided to try its hand at mobile phone operating systems with the Motorola Droid. The phone was a touch screen with a slide out keyboard which was essentially a great alternative to consumers that weren't ready to give up a keyboard. Its success was largely in part because it was exclusively on Verizon (NYSE:VZ) and didn't have to compete with the iPhone which later became available in February 2011. Without competition, Google was allowed to create a following.
BlackBerry's next failed attempt came a year after Apple made its ecosystem stronger with the iPad. BlackBerry decided to release the Playbook tablet to compete against it. Starting at $500, BlackBerry decided it didn't need to undercut the iPad even though it was already late to the tablet party. Some notable problems it came out with was no native e-mail which is something BlackBerry is known for doing well, delays of its 2.0 OS update. It also got a massive price cut later on that year.
There were multiple other problems that occurred within the company such as the CEOs being pushed out and constant broken promises to owners of BlackBerry's products. A recent one such not including BlackBerry's new operating system on the Playbook damaged their reputation.
BlackBerry's more recent problems start at the beginning of this year when it held a conference in NY to show off the new OS. While the presentation was great, the company decided to delay the release of the U.S launch and delay the Q10 even longer. In addition, it hyped up what its sales figure "might" be way too much. In addition, its low cost Q5 phone isn't very low cost after all ($490). While the new OS looks great and is very fluid, BlackBerry no longer has great reputation to make a successful comeback. It's all about consumer perception and BlackBerry simply isn't "in" anymore.
I recommend anyone who wants to take a shot at what I now consider a spec play should do it through leap options. The company does have a large cash hoard of nearly $6, but the cash burn will cut into it overtime.
My option play is:
Buy 1 January 2014 $10 call
Sell 1 January 2014 $14 call
Net cost: .66 for a potential gain of up to $4.00