For the last couple of years, the decline of Research in Motion/BlackBerry (BBRY) has been an ugly thing to watch. The company had its fate dealt to it by smartphone makers - mostly Apple (AAPL) - who perfected and continued to evolve along the lines of the touchscreen phone. BlackBerry simply "missed the boat" in that regard, and decided to stick with what they knew.
It cost the company dearly - BlackBerry's stock has been absolutely crushed to the tune of over 96% from its all time highs in mid-2007:
In the last year, BlackBerry has really struggled to find ground and promise for its shareholders, on the back end of a botched buyout deal for 33% more than what the current share price is today. Instead, the company doubled down, loaded up on $1 billion in convertible debt, and is taking a new swing at things.
Previous CEO Thorsten Heins had already tried an "all in move" with BlackBerry 10, which turned out to be nothing short of an unmitigated disaster: stockpiled inventory, missed shipping dates, poor advertising, and little to no consumer demand.
Now, with Heins out, the Chen era has begun - so what is the focus going to be for the company moving forward? It looks like it's going to be enterprise & business. Something that this investor thinks is a step in the right direction.
Marketingweek.com was one of the outlets to report on John Chen's new plan, which he conveyed in letter style format:
The letter, addressed to BlackBerry's "valued enterprise customers and partners," is an attempt to "set the story straight" and reassure customers the company is "here to stay."
It continues: "We're going back to our heritage and roots - delivering enterprise-grade end-to-end mobile solutions."
The letter takes a similar format to a print ad campaign BlackBerry ran in October, which at the time looked to reassure consumers, shareholders and prospective new owners they could "continue to count on" the struggling smartphone maker.
While the new letter does not mention a complete exit from the consumer market, it seems likely. BlackBerry says its refocus will target four areas: handsets, enterprise mobility management (EMM) solutions, cross-platform messaging and embedded systems.
On the devices front in particular, BlackBerry notes its failure to keep up with its mainstream competitors Apple's iPhone and phones running Google's Android software: "We know that BlackBerry devices are not for everyone. That's OK."
No sooner did Chen begin to allude to his new plans for the company, than an article on Slate popped up yesterday that talked about BlackBerry's most famous long-time user, President Barack Obama:
Barack Obama is the world's most prominent BlackBerry user. For years, he has clung to the original smartphone even as the rest of the world has moved on. But it turns out that even he wouldn't mind upgrading to an iPhone, in theory. (He does seem to love his iPad.) The problem: He's not allowed to.
BlackBerry has long enjoyed a reputation for greater security in its devices than Apple or Android, thanks to its strong encryption practices. As AFP notes, that's one reason it remains popular with Washington officials, even as its market share slides everywhere else. Yet even two years ago Ars Technica was reporting that iPhone and Android devices were catching up in security features like encryption, forced PIN entry, and the ability to wipe your phone remotely if it's stolen.
So, what does this tell us? That BlackBerry can learn from the President - here's a sect of individuals that are being forced to use BlackBerry for a reason - the security. If the most powerful man in the world is using a BlackBerry, it'd be a good idea to think about why, and then try and capitalize on whatever reasoning that is. Moving towards business is a step in the right direction, focusing on government would be a great place to start.
The idea of BlackBerry simply becoming a company that markets their products to law enforcement, government, and people who require substantial security is an outstanding concept, in this investor's opinion.
I commented on this in a past article:
The important thing about security/government is that it really is a niche in the super-saturated mobile phone market. At one point, Sprint/Nextel looked as if they were going to focus on this crowd - right when the two-way feature was developed and Sprint/Nextel was making phones that you could run over with an 18-wheeler. They strayed from this idea, and it was ultimately semi-abandoned from a marketing standpoint.
Just as companies like Panasonic (OTCPK:PCRFF) (who makes the Toughbook) have to make the laptops that are used in the military and law enforcement field, BlackBerry could tailor themselves as the company that's going to provide the security, toughness and innovation necessary for specialized needs like those of government employees
SA Contributor Infinity Group commented on these developments just recently:
With the new leadership and the focus on BlackBerry's historic core strengths, it is an option to open up a long position as a contrarian move. My only concern would be the December earnings date just before the holidays; there may be additional write downs that lower the stock price. If the balance sheet is stabilized moving forward and you have a high risk tolerance, then a long position may be an option for you. This is beginning to look like a start-up company with a sizable customer base and a recognizable brand.
And I have to confirm that I wholeheartedly agree with him. Keeping a short-term eye on the potential negative catalysts associated with earnings this month, BlackBerry could be the contrarian play that turns into the next Priceline (PCLN), Sirius (SIRI), or Apple.
I'm long here and bullish on BlackBerry's turnaround. Best of luck to all investors.