Apple's Missteps Could Be BlackBerry's Turnaround

| About: BlackBerry Ltd. (BBRY)

For a long period of time, BlackBerry (NASDAQ:BBRY) was the de facto choice for businesses looking for a secure mobile device. Apple (NASDAQ:AAPL) has now become the irresistible choice of users in the enterprise sphere, replacing the ex-market leader. Many organizations are wandering away from BlackBerry to satisfy end-user demand, and have started adopting new platforms like iOS. Apple has been gaining market share from BlackBerry as well as Android, and accounted for nearly 73% of total enterprise activations during the fourth quarter of 2013.

BlackBerry was dealt with a huge blow when, in November 2013, Pfizer (NYSE:PFE), the world's largest drug-maker, recommended its 90,000 employees to shift to iOS and Android once their existing contract with BlackBerry expires. This news came on the back of the resignation of BlackBerry's former CEO, Thorsten Heins, who was replaced by John Chen. Since becoming the CEO, Chen has attempted to express to clients that his company has "significant financial strength for the long haul," and has pledged to "rebuild BlackBerry for the benefit of all our constituencies."

However, Chen's not off to a flying start, as last Friday, it was reported that the U.S. Air Force is planning to phase out Blackberry's phones by deploying 5,000 iOS devices and 7,000 Samsung phones. Brig. Gen. Kevin Wooton, communications director for Air Force Space Command, said:

"In order to keep costs down and save on network resources, BlackBerry will be turned in and shut off once the user is transitioned to an iOS device,"

Things couldn't get any worse for BlackBerry, and the company is obviously not happy about this situation. The company released a statement to CrackBerry, flaunting BlackBerry Enterprise Server as the most secure platform in the world. The company said:

"There is a clear reason why BlackBerry has more government certifications than any other vendor, and the only enterprise mobility management vendor and handset maker to receive the Department of Defense 'Authority to Operate' certification. Security is built into everything we do, and we've been doing it longer and better than anyone else.

We've been a trusted partner to government agencies for more than a decade, and have more than 80,000 BlackBerry devices in DISA alone. Our competitors have not been tested in the field or subjected to the long term rigors of high stress applications, making their security model difficult to trust. BlackBerry remains the best option for governments around the world."

Apple has become an integral part of the U.S. military operations. The tech giant was awarded a $9.36 million contract for 18,000 iPad 2s in 2012. The tablets are used as electronic flight bags, and were estimated to save the military $50 million in ten years.

But will BlackBerry's saying come true? Will the organizations regret dumping Blackberry for Apple and Android products? It's quite probable.

Apple Isn't Safer Than BlackBerry

BlackBerry has been flooded in with stories in the news lately about security with users doubting if their devices are protected. However, the company has continued to correctly claim that it is "confident in the superiority of BlackBerry's mobile security platform for customers using our integrated device and enterprise server technology."

Conversely, things aren't the same with Apple. Security of Apple's devices has been subjected to flaws multiple times in the last seven months. Back in September 2013, Apple's iOS7 was discovered with a major security flaw allowing anyone to access a user's information by bypassing the iPhone's lock-screen. This breach was first discovered by a solider based in the Canary Islands, and was further described in an article on Forbes. Forbes reported:

"Anyone can exploit the bug by swiping up on the lockscreen to access the phone's 'control center,' and then opening the alarm clock. Holding the phone's sleep button brings up the option to power it off with a swipe. Instead, the intruder can tap 'cancel' and double click the home button to enter the phone's multitasking screen. That offers access to its camera and stored photos, along with the ability to share those photos from the user's accounts, essentially allowing anyone who grabs the phone to hijack the user's email, Twitter, or Flickr account."

Then, Apple devices' lack of security was further exposed in December, when a report claimed that MacBooks' webcams can spy on their users without warning. Apple's FaceTime camera was embedded with a security feature enabling it to light up green when it was being used. However, it was later discovered that it is possible for hackers to covertly activate the camera without triggering the light that lets the user know it is recording. This vulnerability doesn't work on Macs built post 2008; however, it's probable that similar hacks exist for newer versions.

That's not all! There's more. Last week, Reuters reported another major flaw in the security of the iPhones and the Macs. Reuters reported:

"A major flaw in Apple Inc software for mobile devices could allow hackers to intercept email and other communications that are meant to be encrypted, the company said on Friday, and experts said Mac computers were even more exposed.

If attackers have access to a mobile user's network, such as by sharing the same unsecured wireless service offered by a restaurant, they could see or alter exchanges between the user and protected sites such as Gmail and Facebook. Governments with access to telecom carrier data could do the same."

Though Apple has issued patch fixes for the iPhones, no fix is available yet for the Macs. Obviously, Apple will release a patch soon, but that doesn't matter. The primary point is that Apple's products have been exposed to various security breaches several times in just one year, hurting the company's reputation, while BlackBerry's security has been hermetic. So, investors can expect BlackBerry to gain enterprise market share from Apple in the future, making it a better investment.

Financial effects

The exposé regarding Apple's security flaw could lead users to switch away from its devices. The company is already finding it difficult to record revenue growth. Its revenue in the current quarter is expected to decline from last year as it is. In the first quarter last year, Apple had revenue of $43.6 billion, but it is expected to drop to $43.54 billion this time. Apple's top line growth has slowed down with time as its market has saturated. The company is now trying to enter emerging markets like China, but a public relations disaster in the form of security flaws could further stifle its growth.

The fact that hackers can intercept data on Apple's devices and MacBook webcams spying on users might scare potential buyers away and stunt growth in the emerging markets.

On the other hand, BlackBerry can expect a resurgence as it has harped about the security of its devices and network for long. Although the company is down in the dumps, Apple's security flaw could be a much-needed driver for its products. BlackBerry is further looking to improve security of its devices by increasing security in its BlackBerry World app store. It plans to add badges to tell users about apps that have passed malware and security testing, taking its security attractiveness to another level. So, Apple's problems could prove to be a turning point for BlackBerry's business in the future.

BlackBerry has also entered into a partnership with Foxconn (OTC:FXCOF), allowing it to reduce costs and target emerging markets. BlackBerry has ample cash on the balance sheet and it is aggressively cutting costs, and by focusing on security and products for the emerging markets, a turnaround could be in sight.

Final Words

With the smartphone market saturating, Apple is running out of ways to grow. The enterprise sphere was probably Apple's golden chance, however, numerous security failures indicate that the company is destined to lose market share to BlackBerry in the future. Organizations will soon realize that BlackBerry's security is better than Apple, and will start switching back. Although BlackBerry's shares have taken a pounding over the last few years, it looks ripe for a turnaround. In addition, BlackBerry has a lot more room to grow than Apple, which is why I think it could be a better bet than Apple going forward.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.