May 13, 2014
Jump straight to my latest Quick Take report: "S&R Pros Desperate To Ditch BlackBerry Should Rethink Their Strategy — BlackBerry Finally Opens BB10 OS To Third-Party Management."
This morning, BlackBerry announced the release of the BlackBerry Z3 Jakarta Edition. This new device is targeting the lower end of the market in Indonesia with lessened technical specifications and a reduced price point. It is unclear if the new device will be successful with the Southeast Asian buyer; however, I don't think it matters much to the US-based enterprise.
In the United States, BlackBerry has lost its hardware brand cachet. Over the last five fiscal quarters, BlackBerry total revenue has decreased by 64% from $2.7B to $976M. If we break out the revenue into separate streams — hardware, software, and services — we see that all three segments slowed in that same time period. The hardware revenue stream continues to be the boat anchor that is pulling down the other revenue segment, with a loss of 78%, while the software revenue stream only lost 15%.
The numbers tell a similar story when you analyze the individual revenue streams as a percentage of total revenue. Both software (3% to 7%) and services revenue (36% to 56%) lines are trending upward as a percentage of the total. This means that those revenue lines are shrinking far slower than the hardware line. If we remove hardware from the equation, BlackBerry might even be able to successfully turn the business around as an isolated software and services organization. This is likely a last ditch device play for BlackBerry, but let's not forget that BlackBerry has lots of other interesting product irons in the fire.
So how does this all play into why I believe that the Z3 Jakarta Edition is irrelevant to US Enterprises? BlackBerry hardware is dead for at least the mid-term time frame in North America. Even if the Z3 Jakarta Edition is highly successful in Indonesia, it targets a new market (low-cost consumer) that will have little to no impact on the traditional buyer (enterprise) in the United States. It will be directly competitive with lower end Android-based smartphones, which are a rapidly commoditizing product space. Sales prices for these types of phones are falling drastically, allowing for limited differentiation and innovation.
The bigger news today is BlackBerry opening its hardware management API to competitive third-party mobile device management offerings. This change drastically affects any enterprise that still has BlackBerry devices deployed and significantly lessens the pain for device transition plans. Enterprises may even want to consider keeping their BlackBerry hardware if they believe there is a long-term light at the end of the BlackBerry tunnel. Even if you don't believe that BlackBerry will turn the hardware woes around, the announcement of a more open model leads me to believe that John Chen and team see the writing on the wall with regards to their organizational reinvention.
You can read more detail on the open API announcement in my Quick Take report: "S&R Pros Desperate To Ditch BlackBerry Should Rethink Their Strategy — BlackBerry Finally Opens BB10 OS To Third-Party Management." As always, comments are welcome below.
All data in this post is taken from official BlackBerry published financial reports, which can be viewed HERE.