Canadian handset maker BlackBerry (NASDAQ:BBRY) has witnessed its share price plummet from a peak of over $148 in 2008 to a present value of $10.52 per share. Its fall from grace can be correlated to its continual decline in consumer and enterprise market share as competitors like Samsung (OTC:SSNLF) and Apple (NASDAQ:AAPL) rose to duopolistic dominance. BlackBerry is slated to report quarterly results on Sept 27th, and the results and forecast will no doubt be overwhelmingly negative. This view is shared, and has been discussed, by fellow authors here and here, so I will not dive into the specifics in this article. However, I will provide additional indications that BlackBerry is losing and bowing out of the race to boast the third viable smartphone ecosystem behind Android and iOS, which could translate to further market share deterioration and decline in BBRY share price.
Dark Clouds On The Horizon
2 days ago, the WSJ reported that BlackBerry is considering cutting its workforce by a whopping 40%. This comes at the heels of two small rounds of layoffs in July and August that resulted in 350 workers losing their jobs. Since 2011, BlackBerry has slashed over 7000 jobs. The company currently has approximately 11,000 workers, meaning this round of restructuring could potentially affect 4,400 employees. Such a broad measure would undoubtedly affect all divisions and dampen any synergies that exist between them. Unfortunately, the fact that these rumored layoffs have yet to occur implies BlackBerry has yet to find clear focus and direction.
Yesterday, another piece of bearish news surfaced. The Financial Post reported that a massive inventory writedown - totaling almost $1 billion - is looming. Channel checks have indicated growing inventories in the distribution networks, up from the already massive $887 million worth of inventory in the June quarter. Having written off expenses related to the PlayBook tablet that tally over $1 billion in the last couple of years, it appears history is ready to repeat itself as the latest BlackBerry phones are about to hurt the company's income statement in a gruesome way.
The Z30 was released yesterday in a very nonchalant manner. Rather than hosting a high profile press event in the USA, Canada, or Europe to brag about the company's latest flagship phone, BlackBerry decided to release the Z30 in Kuala Lumpur, Malaysia. According to IDC, Blackberry still has a strong handset presence in this country. However, after learning of the specifications of the Z30, the only reason I could come up with to purchase the device was that it had a 5-inch screen and that it is the inaugural phablet from BlackBerry. Sadly, even the title of the company press release highlights this.
BlackBerry Introduces the New BlackBerry Z30 Smartphone with 5" Display and BlackBerry 10.2 OS
The launch of the much heralded Apple 5C and 5S is still freshly imprinted in my mind. These two new releases impress by introducing a combination of fresh designs, a fingerprint sensor, a 64-bit A7 chip, etc...much more than the new Z30 hopes to offer. We all know that Apple's market cap has taken a 15% haircut post-5C/5S launch, so it was probably a wise choice for BlackBerry to keep the Z30 launch as low key as possible to avoid obvious disappointment for BlackBerry enthusiasts and shareholders.
BlackBerry Not As Pretty As Nokia
As BlackBerry sinks deeper into the abyss, shareholders are ever hopeful for a buyout that can rescue their investments. One such rumored suitor was Microsoft (NASDAQ:MSFT); however, the software giant opted to purchase Nokia's handset division. In retrospect, choosing Nokia (NYSE:NOK) over BlackBerry was the obvious choice. First and foremost, Nokia handsets comprise a dominant 85% of the Windows Phone platform. Furthermore, according to KWP, BlackBerry market share continues to decline in the USA and Europe, whereas Nokia is enjoying renewed success in the latter continent. Research firm IDC also paints a rosy picture for Nokia in Latin America. Lastly, the Nokia name is ranked 22nd on Forbes' "The World's Most Powerful Brands" list.
Since the proposed marriage between Microsoft and Nokia's D&S division, the share price of Nokia has rocketed from $3.90 per share to $6.71 per share as of time of this writing. This equates to $10.5 billion, substantially more than what Microsoft is offering Nokia. In essence, this means authors such as Paulo Santos was correct in his assessment that Nokia's handset business was assigned a negative valuation by the capital markets. If this thesis should hold true for BlackBerry, investors should look hard in the mirror and ask themselves what BBRY shares are really worth.
BlackBerry Will Most Likely Disappear
Imminent company restructuring, a massive inventory writedown on the horizon, a low profile product launch in a remote part of the world, and a wakening giant in the Microsoft-Nokia partnership are all fair warning signs that investors should heed today to avoid disaster tomorrow. Yes, BlackBerry has cash reserves. Yes, BlackBerry has enterprise presence. Yes, BlackBerry has patents. But consumer sentiment is fading and businesses are moving away from BlackBerry (here and here, for example). The growing momentum of the Windows Phone platform as the 3rd viable ecosystem, cemented by the Microsoft-Nokia marriage, will most likely translate into disappearance of BlackBerry's handset business. Remember the BlackBerry PlayBook? Yah, me neither. Interestingly, 3 separate articles were published this morning on Seeking Alpha (here, here, and here) which prays for share price appreciation on the hopes of privatization, spin-off, and short covering. The only response I can think of? Keep praying.
Disclosure: I am long NOK, MSFT. 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.