The Importance Of BlackBerry's New Device Strategy

| About: BlackBerry Ltd. (BBRY)


BlackBerry’s new device strategy is an improvement over its previous effort and shows BlackBerry is still aiming for traction in the devices space.

The strategy is mostly aimed at previous BlackBerry device owners and should be successful in that.

While the Z3 should do well in Indonesia, the device trails most Chinese devices on technical merits.

As we all know, BlackBerry (NASDAQ:BBRY) is trying to regain some of its retail business for some time now. While both the Z10 and Z30 are great devices, they were not welcomed by the market with open arms. The Q5 was such a flop, that BlackBerry does not even mention it anymore, hoping that it was simply a bad dream.

The main reason that the Z10 and Z30 did not sell well (my opinion) was the high price as well as the relatively low specification of the devices. While BlackBerry devices have the fastest browser and are probably in many ways better, compared to most devices, they simply did not have enough apps and bells and whistles like the Apple (NASDAQ:AAPL) iPhone or other Google (NASDAQ:GOOG) Android devices. In addition, BlackBerry was always an enterprise company and less of a consumer company. As a result, they were never really embraced by consumers, once Apple and Google emerged in the smartphone space.

As I noted several articles ago, BlackBerry is going to roll out another entry level phone, the Z3, code named Jakarta. Contrary however to the Q5, this time I think BlackBerry is on the right path.

To begin with, the device will have a full screen phone with a 5 inch screen. This is very important as I outlined a few articles ago. Basically, users these days mostly socialize on a smartphone. Smaller devices, while very capable of running all apps, are not big enough for users to be able to type and converse with ease. That is very important, especially in developing markets, where many budgets do not stretch far enough for people to buy both a smartphone device and a desktop computer. So if you have to buy only one device, the preferred choice is one where you can talk on the phone, but at the same time something handy to communicate on Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR) with. Thus the preferred choice would be a 5-inch smartphone.

The next correct thing BlackBerry did was to make the Z3 dual sim capable. Most people probably don't understand why this is important, but it is very important, if you live in most emerging markets.

If you look at the type of smartphones coming out of China these days, they are almost 100% dual sim capable. The reason for this is so users can take advantage of multiple prepaid options, so as to minimize their communication costs. So for example, on one prepaid sim you might be able to make voice call for less, but on another, you might have some special type of data plan. Like we have discussed before, most people in the emerging world use prepaid plans because they prefer not have a monthly bill (a trend that is also catching up in the U.S.).

The third correct thing BlackBerry did was to make the Z3's design in tune with what is considered "aesthetically pleasing" these days. Again, if you look at the type of smartphones coming out of China, you will see a lot of similarities.

And finally, the Z3 will retail for under $200. That is also another correct strategy. While you can buy a Chinese device for under $200 with better tech specs than the Z3, the truth is that the Z3 is probably of better quality. I think consumers will prefer to buy a BlackBerry Z3 instead of a no-name, dime a dozen Chinese device (which are very good devices, don't misunderstand me). So overall, I think this time around BlackBerry got it right in the low-end device arena.

The new BlackBerry Z20 on the other hand aims to sell in western markets, such as the U.S. At the same time, it is a device targeted at die hard BlackBerry users and the enterprise space.

The Z20 will feature BlackBerry's patented QWERTY keyboard with frets and sculpted keys for the best typing experience, according to BlackBerry. The device will have a large battery to provide "superior life" and will also feature a 3.5" touchscreen (the largest display on a BlackBerry QWERTY yet), and will be crafted from premium materials and designed for reliability and durability.

Obviously, while the device will be targeted at users wanting a QWERTY experience, it nevertheless leaves room for people wanting a touch-screen also. In addition, this will no doubt be an executive phone and will probably come at a premium. The bad thing is that this device is scheduled to come to market in September, unless something changes in the meantime.

While we do not know much about the Z20, the Z3 is a disappointment, in the sense that most devices these days come with a quad-core processor, but the Z3 will have a dual-core 1.2GHz Snapdragon with 1.5GB of RAM. Most phones from China come with much better specs than that. And while all cameras are not alike, the Ζ3's 5MP camera is not exactly an inspiration. Many $200 phones from China these days come with a 13MP camera.

The bottom line

BlackBerry's new device initiative will probably prove more successful than the company's previous effort, although the specs on the devices are nothing to cheer about. I am pretty sure that the Z3 will sell well in Indonesia and will probably put a backstop to BlackBerry's market share slide in that country. However, counting on die hard BlackBerry fans to buy the Z3, simply because of the BlackBerry name, might not be enough. Personally I want to see a low end device with much more bells and whistles and something that can compete on specs with Chinese devices.

As for the Z20, it is still very early to get a sense of how successful it will be or not, but I think it will sell well and will probably bring back old BlackBerry fans who still reminisce a QWERTY keyboard. Exactly how many of them are still around, or how many new users the Z20 will attract, is hard to tell.

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.