A news story just broke alleging that the first BlackBerry 10 phones will be powered by Qualcomm's (NASDAQ:QCOM) Snapdragon S4 Pro processors. I've been bullish on Qualcomm for quite some time, primarily due to their technological dominance in the smartphone space. They lead the way with both LTE support coupled with a world-beating custom ARM-based CPU architecture in their Snapdragon S4 processors. I believe that Research In Motion's (RIMM) fortunes could very well reverse if it is able to put out a strong hardware platform coupled with a vibrant software ecosystem.
Modern Hardware Is A Great Start
It's not hard to buy chips from any particular vendor, including Qualcomm: you just need the money to do it. The significance here, though, is that RIM is clearly taking performance seriously. They're going full out and using what is (arguably) the best smartphone system on chip available currently, meaning that on the performance side, RIM will not be at any significant disadvantage to its competitors (and could be ahead of quite a few), and it will provide competitive differentiation as a squarely high end phone vendor.
Further, I believe that the move away from the physical keyboard with BB10 devices and a focus instead on a unique, differentiated on-screen keyboard will bring the company into the "modern" era. Let's face it: when everyone else has full touch screen phones, do you really want to be the only vendor still having a bulky physical keyboard?
A Focus On Software
Having a solid hardware platform is a necessary but insufficient condition. Software will ultimately make or break the next generation RIM phone, and I believe that the company's decision to redesign the operating system from the ground up was the right thing to do.
In order to bring developers and consumers on board, the OS needs to be easy to use from both user and developer standpoints. While it's still too early to tell how successful all of this will turn out to be, as developer samples just only recently got sent out, it's key to note that there are a number of very attractive features in the new BlackBerry OS:
- RIM has made it easy to port Android apps to the BB10 platform with a specially designed API. This is probably the single most significant aspect of the new BlackBerry phones. Android has the dominant smartphone position, so developers will be certainly be lured by the prospect of being able to deploy on both platforms.
- RIM has focused on developing a number of neat built-in applications such as the new camera application. More importantly, though, RIM will be providing a rich developer toolkit for the camera, which could lead to some "killer" apps from the development community
- The built in keyboard is also a huge point of focus. Many BlackBerry users enjoy the ease of typing on physical keyboards, so the keyboard here is critical. If RIM can combine the ease and convenience of the physical keyboard as well as the benefits of having a digital interface, then this alone could be a rousing success.
RIM Can Afford A Turnaround
Turning to fiscal matters, another extremely important aspect of RIM's turnaround story is that they can afford it. Despite posting a fairly heavy loss in the most recent quarter of $0.37/share against a consensus of $0.04/share loss consensus, the company is still flush with cash, with $1.77B on their books and no long term debt. That means, quite obviously, that they can afford to keep taking losses on the chin in the short term until they can really execute their long term strategy. I don't think insolvency is in the cards for a good long while, so patient investors with a fair amount of risk tolerance can probably wait it out for a while.
Betting on a turnaround is risky, especially with incredibly strong competitors like Apple (NASDAQ:AAPL) and Samsung to deal with. There's every chance in the world that RIM's efforts end up not being enough and that the company eventually goes under, get bought out, or something else that signifies the end of the company as it stands. However, it seems that management has been doing the best that they can with what they've been dealt. A new platform with top notch hardware, a modern design, and a developer friendly ecosystem. It seems to me that with the company selling assets, maintaining a large cash position, and focusing on their future platform, this is as credible a turnaround story as it gets.
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.