Can a late Android gambit get Blackberry out of a jam?
- Summary:
- Can a new Android gambit help boost Blackberry's flagging fortunes or is the firm being bounced from one announcement to another?
Say what you like about Blackberry’s prospects, the firm’s not about to go down without a fight.
Earlier this month, it announced a $425 million takeover of Good Technology in a bid to boost its ability to help corporate clients manage smartphones running on different operating systems as it shifts focus to device management software for enterprise customers.
But with handset sales still accounting for around 40% of Blackberry’s revenues, it’s taking time to make that transition, so something needs to be done to kickstart that business.
Blackberry is therefore lessening its dependence on its own shrinking platform and chasing after the Android market. That makes perfect sense of course. Compare Android’s 80% share of the smartphone market compared to around 1% for Blackberry’s own OS.
CEO John Chen says:
This phone is the answer for former BlackBerry users who missed the physical keyboard but also need apps. It also has a curved all touch screen. The name of the phone is Priv, spelled p-r-i-v, which is derived from the BlackBerry core mission of protecting our customer's privacy. So Priv is really for the privacy and privilege. That's how we thought about it.
But with continuing decline in device marketshare for BB10, this Android gambit inevitably raises questions on how soon it might be before Blackberry just pulls the plug on its own offerings and chases the Google market without distraction.
Chen won’t be drawn on this and there’s clearly a lingering, if perhaps unwise, loyalty to the firm’s home-spun platform:
First of all, we'll have to make sure that Android is successful first. There is a very loyal base in the BB10, especially the government and some highly regulated industry customers.
But he will concede:
If our plan of doing the BlackBerry Android type of implementation works well and the security side of the equation is well accepted by the governments and this base, of course we could then replace them or merge them into it.
Bounced
The fact that there are a lot of questions about the Android gambit is due to the fact that Blackberry lost control of its announcement and was bounced into confirming the truth of leaks from the firm about its strategy. As such, that strategy is not fully-formed, admits Chen:
The reason why I kind of 'jumped the gun' to make the announcement is because it's leaking everywhere.
So we're confirming the fact that we are bringing our security know-how onto the Android ecosystem and we’ve built a phone with the help of a lot of people, including working with Google.
We’ve been working on this strategy for a long time, unfortunately it leaked, so I think it's best to let everybody know.
As for the Good acquisition, Chen is keen to clear up some misconceptions, particularly around perceived product overlaps:
BlackBerry and Good have strength in non-overlapping areas. This is one of the major reasons why this acquisition is so attractive to us. BlackBerry is strong in cost platform in the end and a lot of the value-added surface. We also have a growing base of Android users to go with our BB10 base, as well as the BBOS base.
Good is good at mobile apps management and bringing a larger benefit of iOS users . I believe they have 64% of their licenses on IOS. We share a common heritage in privacy and security. Combined, we will have the broadest and the deepest platform in the Enterprise Mobile Management (EMM) space.
He adds:
We thought about it long and hard, and decided on Good Technology because of the fact, that our MDM (Mobile Device Management) solutions are more modern and robust and their application management layers are a lot better than ours, while we were starting to build our own.
So there is some natural synergy there and the customer actually sees it. And the customer likes our support infrastructures and that's come through loud and clear. I think the customers, once they see our plans and roadmap, I think they will be very comfortable.
Blackberry also recently completed its acquisition of networked crisis communications company AtHoc, which provides allows businesses to exchange critical information with people and connected devices, such as Android and iOS-based smartphones, computers, fire panels and sirens in real time during business continuity and life safety operations.
Chen says:
This is a business extremely well-aligned with our strategy and our core vertical, such as government and public sector.
A case in point is AtHoc's recent win with the TSA, Transportation Security Agency, which will enable protection in crisis communications to over 200 major airports. A win like this highlights the opportunity we have to leverage AtHoc solutions in our core verticals and across our much larger global footprint and much larger government customer base.
In the longer term, AtHoc will be integrated with our BBM and some of the enterprise offerings and will be a key component of our Internet of Things platform.
But on the IoT front, it’s back to not-fully-formed thinking again:
On the IoT side, we just finished our cloud about a quarter ago and we're putting a little bit of a finishing touch around some of the products. So we really haven't really completely "rolled out and delivered" into the customer's hands. We are still in kind of the early stage of that.
We are building both professional services organizations, as well as sales organizations around it. That's the new investment that we have been making in Q2 and we have been making all along, but we also made it in Q2 and we will make more of that in Q3. When the go-to-market team is ready, we should expect to see IoT revenue. But so far, it's still very skewed to automotive.
It’s going to be vital to have skin in the IoT game, concludes Chen:
I think about it a little differently. I think about managing endpoints. I think about managing the Internet of Things (IoT). I don't really think about managing only EMM. But, EMM just happens to be the next monetizable space. This is why we're spending so much money on the IoT side and the embedded side.
If [we’re] only doing EMM, I'm afraid that one of these days we all wake up and then EMM is given away for free.
It’s focusing on making a much broader strategy than just EMM, and this is where the IoT and the embedded space and QNX [operating system] comes in.
My take
Blackberry’s fortunes remain on the wane with the prospects for recovery a mixed bag.
Blackberry’s share price is down 40% year-to-date.
It just turned in quarterly revenues down to $490 million from $916 million last year.
Hardware revenues contributed approximately 41%, Services revenues accounted for 43% while 15% came from Software and Technology licensing.
The company reported 2,400 "enterprise customer wins" during the quarter, 60% from cross-platform deals.
It’s about to bet the farm on Android - too late? - and a still-taking-shape IoT strategy.
There’s a lot of work needing to be done on the messages to the market to rid the firm of the impression that it’s being bounced from one announcement to another. It could take some lessons from Apple here.
Meanwhile I'm off to take delivery of my iPhone 6s Plus.