In response to my last article on Blackberry (NASDAQ:BBRY) and the doubtful long-term impact on the company from the Apple (NASDAQ:AAPL) and IBM (NYSE:IBM) tie-up, there were a number of comments alluding to Apple being worried about the upcoming release of the Passport, and that perhaps a resurgent BlackBerry would threaten Apple's endeavors to become more relevant to the enterprise. Granted, a resurgent BlackBerry wouldn't sit well with Apple or its fandom. After all, Apple's very identity as a mobile company was practically forged in the ashes of BlackBerry's market share wipeout. But could the Passport itself be leading to Apple execs counting sheep? The answer is, perhaps yes.
I was a bit skeptical myself until I started reading the comments in response to my article. One such comment came from noted BlackBerry naysayer (and big time Apple proponent) Mr. Knowitall (don't we all have one in our lives?). Let me tell you about Mr. Knowitall. He is one of the most prolific and eloquent BlackBerry detractors on Seeking Alpha. He has over 7,000 comments, a good many of them penned at the expense of Chen & Co. Not a single bullish BlackBerry article has gone unscathed by Mr. Knowitall's lacerating keystrokes.
In addition to being a trader who shorts BlackBerry, Mr. Knowitall is a Software Architect and Mobile Security Expert with more than 30 years of experience. He holds patents and builds his own mobile apps and games. And he's smart - wicked smart. Most of his comments - while often sarcastic and self-congratulatory when BlackBerry stock goes down - are well-conceived and backed up with links and other data. Who knows, he might even work for Apple.
Well, when Mr. Knowitall posted the following in response to my article, just imagine my eyes widening and posture improving as I read in shocked silence:
"Okay, for discussion purposes only, let's assume BlackBerry came up with a truly innovative form factor that nobody else thought of. Add to that it's a hot seller. The Passport. How hard would it be for Apple to 'turn the crank' and produce that form factor? Heck, how about Samsung? Three months? A form factor isn't a defensible position. If it's a winning form factor, others will copy it. Also, if I remember correctly, I think BlackBerry's QWERTY patent may require the 'smile' arrangement of keys. If this is (sic) the case, then the Passport's keyboard would also be fair game. And even if the Passports QWERTY is protected, another finely crafted QWERTY could be used, and Voilà! BlackBerry is in trouble again."
Okay dear readers say it with me now…. "O - M - G!" Here we have one of the most coherent, prolific and well-researched mobile experts and Apple fanboys on Seeking Alpha hypothetically discussing not only the Passport's success in the marketplace, but that Apple could copy it without much trouble. Let me officially go on record and say that only one thing could be a bigger win for BlackBerry shareholders than every share of stock instantaneously going "poof" and turning into a winning lottery ticket - and that would be Apple copying the BlackBerry Passport. If Apple were to copy the Passport it would mean the device was catching on big time, stealing back market share, and truly shifting the form factor of the smartphone back to one based on a physical keyboard. The fact that Mr. Knowitall was even remotely conceding the possibility of the Passport's success and Apple copying it just moved BlackBerry stock past titanium on the periodic chart.
To be clear and fair, from all indications Mr. Knowitall is still quite bearish on BlackBerry, and his many subsequent comments in response to other articles don't seem to indicate the Passport has changed his long-term view on BlackBerry's prospects.
The BlackBerry Passport is Truly Disruptive Innovation
Wikipedia defines Disruptive Innovation as "innovations that improve a product or service in ways that the market does not expect, typically first by designing for a different set of consumers in a new market and later by lowering prices in the existing market." Few can say that they expected something like the Passport from BlackBerry (or from any manufacturer for that matter). One's first response to the Passport is, "whoah, what the…?" We've been so conditioned to expect that smartphones must look like sleek bars of rectangular black soap that all look the same. But then when we process it a bit… "more viewing area, nice big keyboard, longer battery, ability to create content…" it all starts to make sense and logic and utility overcome our temptation to be herd followers. That fact is that the device fills a major gap in the market between the smartphone and a laptop computer.
There are no doubt legions of lovesick teens who can type War and Peace-like tomes to each other on their smartphones' virtual keyboards, but don't count me among them. Ask yourself this - how many times have you been in bed reading emails on your tiny phone screen or even on an iPad and said to yourself, "I'll just reply to that later?" It really goes to show what a monumental physical effort it truly is to go from head-on-pillow with the lights out, all the way to propped-up in bed with laptop open. Well, for millions of virtual keyboard-challenged businesspeople, salvation is at hand, and it's called the BlackBerry Passport. Now there's no "reply later," and you can stay snug as a bug under the covers when typing out your TPS Reports. With the Passport you'll be able to actually create content anywhere, anytime.
From Business Disruption to Fashion Disruption
Wikipedia's definition of Disruptive Innovation also touches on "a different set of consumers." Clearly, the Passport is targeted at the business set, who need to actually interact with and create content within applications, not just view data on the run as we all can today with our existing devices. But what if - and perhaps this is Apple's fear - the Passport catches on as a fashion accessory as well, and starts to be seen in the hands of popular rappers, pop artists, celebrities and other fashionistas? Why would they ever want a Passport you ask? Hmmm let's see, because it could be seen as new and different and hip? But there also are practical implications as well - they're all Tweeting away at 8 billion o'clock in the morning at night clubs and in the back of limos! Do I want to Tweet on some tiny virtual keyboard smeared with sweat and mascara, or on the Passport's gorgeous and roomy physical keyboard?
The Passport as Fashion Disruption (artist's rendition)
And if you have any doubt that the Passport will become a fashion accessory, sorry it's already happening, and the device isn't even released yet. As I realized the potential for the Passport to be a fashion disruptor as well as a business disruptor, Apple's potential concern made more and more sense, and Mr. Knowitall's huge Freudian Slip just confirmed it. What happens when teens see their pop idols carrying around the device? In a stock market where Apple shares are moved more on each million iPhones sold than on any other metric, what could concern Apple more than a new phone on the market with the potential to steal back market share, market share that Apple had already banked away and thought was buried six feet down under BlackBerry's gravestone?
Even if the Passport sells just a few million units per year (I think it will be much higher globally), that could materially impact Apple given the laser focus on its iPhone sales. The impact could also be felt in the enterprise, as existing BlackBerry BES customers stay with BlackBerry in anticipation of the Passport and the Classic. This is why handsets are still so critical to BlackBerry's strategy in the enterprise - handset desire among the enterprise user base is a huge influencer on infrastructure decisions.
The Bottom Line
Given how visually disruptive the Passport is, it's going to get a HUGE amount of press and reviews in the coming months (ahead of the iPhone 6 launch), positive or negative. And that press will also shed tangential light on the new BlackBerry Classic, and the Z30, and Secusmart, and all the other stuff that BlackBerry is up to in its resurgence. The Passport is going to be one, giant, neon sign screaming "BlackBerry" from every corner of print, web and yes in the hands of its users. Talk about viral technology. Because the Passport will be impossible to miss, every single Passport user will be a walking billboard for the new phone, and for BlackBerry's comeback. If you own, short, or are considering buying BlackBerry shares at the current price/sales ratio of 1, think about that for a moment. Also check out QTR's good piece on the Passport.
Whether or not the Passport pushed Apple to partner with IBM, well that's debatable. But what isn't debatable is that BlackBerry is still very much on Apple's radar, and that the timing of the announcement to coincide with BlackBerry's stock resurgence and positive momentum in the press may not have been such a coincidence after all. I can't wait to hear what Mr. Knowitall has to say. I can just hear him now... "I didn't really mean that Apple might actually end up copying the Passport...". Ha!
Please do your own due diligence prior to investing. This article contains my opinions only, which should not form the basis of an investment decision.
Disclosure: The author is long BBRY, AAPL. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.