- Never caring about market share, Apple understands that consumers will always pay for quality innovation that comes with clear differentiation over its rivals.
- The worst thing that can happen is that the Z3 becomes a success, one that will cannibalize BlackBerry's flagship handsets.
- BlackBerry just devalued its own brand. And it's nailed its own coffin.
The more things change, the more they remain the same. No company exemplifies this idea today more than BlackBerry (NASDAQ:BBRY). Left for dead after several years of punishment at the hands of Apple (NASDAQ:AAPL) and Samsung (OTC:SSNLF), like Rasputin, BlackBerry continues to reemerge. This time, under new CEO John Chen, who deserves credit for this brief resuscitation. But can it be believed? I don't see how this company possesses the "wow" factor or the management needed to thrive in the mobile space.
BlackBerry stock began 2014 with plenty of promise. Shares were up at one point by 46%, reaching an intra-day high of $10.90 on Feb. 25. Since then, the stock has dropped 32% to Monday's close of $7.44. Although Chen is working diligently to reinvent the company, he hasn't said anything that ousted CEO Thorsten Heins didn't say. Although the "underdog feel-good story" resonates with investors, it's time to embrace the reality that this company, in its current state, is a dead asset.
On Tuesday, the company announces plans to sell its new handset model, the BlackBerry Z3, a cheaper phone with a low-cost touch-screen designed specifically for Indonesia. But aside from trying to grow share in its largest global market, the Z3 is aimed at expanding BlackBerry's position in emerging markets like Asia and South America. Nokia (NYSE:NOK) recently made this attempt and failed. Only Apple and Samsung has had any degree of success.
In fact, Apple's iPhone 4, which is three years old, still owns the 5th best-selling handset in Asia. Both Apple and Samsung hold the top 5 spots in that category. So I remain skeptical that the Z3 will be able to break ground in markets where BlackBerry has shown no traction. And BlackBerry believes that using a flashy unveiling at the Ritz-Carlton hotel in Jakarta with hip-hop dancers performing on a laser-lit stage will drive more interest. BlackBerry still doesn't get it.
Consumers are not interested in female ushers wearing aqua-blue cocktail dresses and black high heels. They care about innovation. And that has been BlackBerry's biggest deficiency over the past five years. And this last-ditch effort to resemble anything close to "cool" is an embarrassment to the brand.
Recall, last year when everyone was clamoring for Apple to release a cheaper iPhone to compete in market share with Samsung, Apple CEO Tim Cook said "we are not in the junk business." This morning's announcement by BlackBerry suggests that it has effectively entered the Junk business, just to remain relevant in an industry dominated by Apple and Samsung.
Although Chen appears to have brought some stability to the brand, he has to be careful here. The worst thing that can happen is that the Z3 becomes a success, one that will cannibalize BlackBerry's flagship handsets. For a company already dealing with eroding sales and weak margins, that's the worst thing that can happen. And the signs are already there.
Recall, in the company's most recent quarter, BlackBerry said it sold 3.4 million smartphones in the period, including about 2.3 million BlackBerry 7 models. This means close to 70% of handsets sold were BlackBerry 7 model phones. These are the older phones, not the newer BlackBerry 10 models.
This would be akin to Apple selling more iPhone 4 models than the newer iPhone 5S. If that is not an indictment of BlackBerry's failed designs and/or marketing, I don't know what is. And it's time that management starts paying attention.
Never caring about market share, Apple understands that consumers will always pay for quality innovation that comes with clear differentiation over its rivals. This was how Apple sold 44 million iPhones in the recent quarter, when analysts were projecting 38.5. And when you factor Apple's gross margin of 39%, it was a great idea for Tim Cook to stay away from junk. BlackBerry just devalued its own brand. And it's nailed its own coffin.
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