BlackBerry Update: We’re Not Dead!

BlackBerry Update: We’re Not Dead!

By Michael F. Finneran November 17, 2017 2 Comments
Michael Finneran JPG 125
BlackBerry Update: We’re Not Dead! by Michael F. Finneran

BlackBerry hosted its Security Summit in New York this week, and the big message appeared to be, “we’re not dead!” BlackBerry’s CEO John Chen even joked that when he visited the New York Stock Exchange (BlackBerry recently moved its listing there from NASDAQ) everyone he was introduced to immediately responded, “Are you guys still in business?”

Well, BlackBerry is still in business, and may be showing some of its first positive signs. Second quarter results published in September showed significant growth in software revenues and had announcements of sales in both of its major segments. UBS Group AG signed up for the company’s Unified Endpoint Management (UEM) MDM/EMM solution and Delphi Automotive signed a deal to use BlackBerry’s QNX operating system for its self-driving car technology.

However, the numbers demonstrated that BlackBerry is a mere shadow of what it was 10 years ago when the iPhone was launched. BlackBerry’s revenue peaked in 2011 at close to $20 billion. Revenues for the fiscal year ending February 2017 were $1.3 billion, down 39% from the previous year and 93% from their peak.

BlackBerry’s business is also decidedly different than it was in 2011. At that time, BlackBerry’s main revenue source was smartphones, and the iPhone (introduced in 2007) was still a relatively crude product with lousy (but improving) battery life, poor voice quality and mostly laboring over AT&T’s underpowered data network. In January of 2011, Verizon got the rights to sell the iPhone, but for BlackBerry, the writing was already on the wall. I wrote a NoJitter blog on RIM’s first quarter results in June 2012, RIM’s second consecutive quarterly loss, titled, “RIM: It's All Over Now, Baby Blue.” Along with the loss, that announcement also included a delay in BlackBerry’s next generation device and the layoff of roughly a third of the company’s workforce. That’s as “black” as a berry can get.

The reasons for BlackBerry’s fast and brutal decline was that they had “stuffed the channel” to pump up 2011 numbers, and, despite its shortcomings, customers were already flocking to the iPhone. Few people recognized that during its heyday, roughly 70% of BlackBerry devices were being sold to consumers. Everyone thinks of BlackBerry as an “enterprise wireless” device, but it was really consumer sales that powered its final ascent. Of course, consumers were the first customers to jump ship for the iPhone, and eventually enterprise users joined the throng. BlackBerry is still marketing handsets, now using the Android operating system, and while it does sell the BlackBerry KEYone device that features the fabled hard keyboard, it is actually manufactured by TCL Corporation.

BlackBerry has refocused itself on two primary product lines: MDM/EMM and the QNX operating system that it acquired in 2010.

BlackBerry invented the MDM business with its BlackBerry Enterprise Server (BES) that was a staple in mobile networks for years – of course, it only managed BlackBerrys. To address the growing iPhone/Android threat, BlackBerry acquired German MDM firm Ubitexx in 2011, but the combination didn’t fly and organizations with iPhone and Android devices to support flocked to MDM solutions from VMWare AirWatch, MobileIron and IBM’s MaaS360. In the meantime, many customers decided they didn’t need an MDM solution or chose to make use of the rudimentary MDM functions that came at no cost in Microsoft Exchange.

To get itself back in the MDM/EMM game, BlackBerry acquired MDM maker Good Technologies in 2015. Good was a better MDM fit for BlackBerry because of its similar reputation on the security front, and the fact that it was selling to many of the same financial services companies and government agencies that had the BES. The combined product became the BlackBerry Unified Endpoint Management (UEM) platform, and the combination does seem to be working as Gartner has BlackBerry in the Leaders Quadrant in the Magic Quadrant for Enterprise Mobility Management Suites for 2016 and 2017.

The QNX acquisition and its current role in BlackBerry’s plans is still something of a mystery. QNX builds software for the automotive industry and other segments requiring a high reliability operating system. BlackBerry's original press release for the acquisition made reference to “long-term synergies for the companies based on the significant and complementary OS expertise”; nobody could figure out, then or now, what they were talking about and none of those envisioned “synergies” have yet materialized.

I stopped paying attention to BlackBerry some years ago, but I was interested in attending their Summit to see where the company was today, and to get a look at John Chen, BlackBerry’s CEO since 2013. I had met Co-CEOs Mike Lazaridis and Jim Balsillie back in the day, and even spent a few minutes with Thorsten Heins who held the reins for a brief period starting in 2009.

Mr. Chen struck me as a straight “business guy,” who would approach BlackBerry as any standard business proposition. While comfortable with the numbers, he didn’t strike me as being especially comfortable with the technology – not a positive for a guy charged with reviving a “troubled technology company.”  During his keynote, it seemed like Mr. Chen couldn’t get off the stage fast enough.

Mr. Chen has surrounded himself with some competent lieutenants who we got to meet at a closed-door analyst session later. There we met Carl Weise, President, Global Sales; Billy Ho, EVP Enterprise Products and Value-Added Solutions; and most notably, Sandeep Chennakeshu, President, BlackBerry Technology Solutions. I got to spend some time with Dr. Chennakeshu later, where I found he had previously served as President of Ericsson Mobile Platforms, Chief Technology Officer of Sony-Ericsson and Ericsson Mobile Phones, and had his name on some 73 patents.

The future for BlackBerry appears to rest with how well Mr. Chen can manage its resources, but his greatest resource may be his executive team. A business background is fine if all you want to do is shut down the company and sell off its assets, but nursing it back to health will take a real leader. Mr. Chen will need to lean heavily on his management team to rationalize the product line and provide a vision and a plan that will bring the company back to profitability.

BlackBerry has a proud tradition in the mobile industry and in the Canadian business world. The company essentially defined the first generation of the smartphone market, and failed spectacularly in recognizing and addressing the existential threat that the iPhone represented. The company still has a strong reputation for security in the mobile space, but with the demise of the BlackBerry as a device manufacturer that reputation is starting to age. If BlackBerry can establish a foothold with its traditional government and financial services customers, it may be able to work its way back in the MDM market and whatever follows it.

QNX? I still don’t know understand what that has to do with anything, so it’s probably time to say “goodbye.” The only question then is, how do you divide up the management team to run two separate companies?

 

2 Responses to "BlackBerry Update: We’re Not Dead!" - Add Yours

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Otto Schmid 11/17/2017 11:28:00 PM

While I agree with your assessment of John Chen there are plenty of shortcomings in your article:

1. "..it may be able to work its way back in the MDM market..": BlackBerry already is #2 behind Airwatch in the MDM market

2. "..QNX? I still don’t know understand what that has to do with anything, so it’s probably time to say “goodbye...": Really? QNX is currently among the leading car OS (installed in over 60 million cars) and could become the backbone of autonomous driving if executed correctly

3. You forgot to mention some other growth areas of BlackBerry:
- BBM consumer (competes with WeChat and Line)
- AtHoc (competes with Everbridge)
- BBM Enterprise (competes with Slack and Twilo)
- BlackBerry RADAR (competes with Verizion`s fleet management operations)
- 40,000 patents

When the different divisions of BlackBerry would be valued based on a standalone basis like its competitors you would get a market cap north of $20 billion. The problem is that John Chen might be a good numbers and operational manager, but is really bad when it comes to representing BlackBerry and its products
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Bennet Bayer 11/20/2017 3:59:33 PM

Spot on Otto! I would augment with a disagreement, the "resource" of his executive team is a shadow of what it was. Sadly, in my dealings the Canadian executives were the ones exhibiting the RIM arrogance which got this company into so much trouble.

Perhaps time to split the company based on the standalone abilities.

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