BlackBerry’s New Design Will Save the Stock
Chris is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Thanks to a small team of developers in Sweden, the BlackBerry may not die an immediate death.
In 2012 Research In Motion (NASDAQ: BBRY) acquired The Astonishing Tribe (TAT), a Swedish-based high-tech design shop. As a result, RIM is rolling out two new phones in January that CEO Thorsten Heins “promises will make RIM competitive again in the global smartphone market.”
Let me be clear. I don’t think that these new launches will save the company – RIM has a large mountain to climb before it can regain any of its old prominence. However, RIM’s new plans have saved its stock price. For now.
(Note in the chart how RIM is the only tech firm I mention in this article that has a positive 1-year return, beating Apple, Nokia, Pandora, and Facebook.)
Take a look at RIM’s Q3 market share, a chart I pulled from my post on mobile makers: “Is Nokia Trying Out a New Profit Model?”
Just 2.1% in Q3 2012? Ouch. Consulting firm IDC estimates that RIM’s overall share of the global smartphone market is 4.7%. To put 4.7% in perspective, RIM’s share was 9.5% one year ago and a 50% share in 2009. RIM’s lesson: If you misjudge what customers want, the tech sector is ruthlessly unforgiving.
Corporate and Government Market
All hope is not lost. RIM has two positives right now. First is that BlackBerry still has a hold on the corporate and government market. In 2013, IDC expects Apple (NASDAQ: AAPL) to sell more to these groups than RIM. The downside is that more companies are allowing employees flexibility in selecting their own mobile phones or in compensating employees for a percentage of the monthly bill of their personal mobile phones.
However, BlackBerry already has these large contracts in place. Thus, for companies who are deciding whether or not to drop BlackBerry, RIM is not competing with Apple or Google or Nokia (NYSE: NOK). Rather, RIM’s biggest enemy is in the mirror.
In addition, now is as good a time as any to go against Apple in a space where RIM already has traction. Apple is still dealing with a failed mapping app, a growing iCloud that it hopes will surge past 200 million users, departed executives, and competition from Pandora (NYSE: P) in its iTunes department. Apple is nimble and sharp, but it is also busy “putting out fires” right now.
For example, Pandora streams its content to users, making it easy to use on mobile and tablet devices, and when driving. The benefit is simple: easy usage means more usage.
In contrast, users must download iTunes. iTunes boasts over 400 million users, according to The Wall Street Journal, but eventually it will have to find an easier way to allow those users to listen to music on smaller devices. Apple’s iCloud works for some users, but Apple needs to either grow iCloud or add another solution to continue its growth against Pandora in the future.
The second positive for RIM is its newly designed user interface. For example, TAT helped build the central screen, which according to The Wall Street Journal lets users:
See all their incoming messages, from email and text messages to Facebook (NASDAQ: FB) and Twitter updates, without toggling back and forth between those applications or halting a loading Web page or video on the browser.
The new design gives users an easier way to navigate between apps, and it spices up more simple tasks, like setting the alarm clock.
Facebook is a beneficiary of RIM’s new design. The new screen lets users see continual updates, allowing them access to Facebook news feed updates without actually having to open Facebook’s app again and again. For the same reason, Facebook was also a beneficiary when Nokia rolled out its new “tiles” display.
Competition from Nokia
On the downside, RIM faces pressure from Nokia. Nokia has been busy inking deals with AT&T and Verizon to launch new Lumia phones on their networks. I have read some reports where customers prefer the Lumia even over the iPhone or popular Android devices. And the kicker: Many of Nokia’s phones cost just $99 with a two-year contract.
Nokia is having a hard enough time clawing its way back to the top of the industry. It will be hard for RIM to do the same.
At the End of the Day: Customer Adoption
In the private world, BlackBerry is dead. Apple and Google are humming, and Nokia just reinvented itself. Even with a splendid product, RIM may not be able to earn back its reputation in the private sector, rendering its updates too little too late.
The corporate and government world is a different story. RIM still has contracts outstanding with large organizations. That puts RIM in the position of not having to win, but instead trying not to lose. A great product could keep its largest clients happy.
In all, RIM’s new phones coming in January may not save the entire company. But for now, the new designs saved the stock price. I don’t think that BlackBerry is a long-term buy, especially at its current price. I would prefer to see a dip before entering. But I do believe that without its new products, RIM’s share price – which jumped about 90% during the past three months – would be in a much worse position.
ChrisMarasco has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple and Facebook and has the following options: long JAN 2014 $20.00 calls on Facebook. Motley Fool newsletter services recommend Apple and Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!