Not A Vote Of Confidence

Reuben is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

BlackBerry (NASDAQ: BBRY) co-founder Jim Balsillie recently announced that he no longer owns any shares in the company. This information comes at a sensitive time for the company as it attempts a comeback with its recently launched BlackBerry 10. Clearly, this isn't a vote of confidence.

A Big Fall

When BlackBerry first introduced itself to the world, it was known as Research In Motion. The company's phones were nothing short of a phenomena. BlackBerries, in their day, changed the cell phone market in the same way that Apple (NASDAQ: AAPL) did with the iPhone. Customers were so addicted to BlackBerries that the phones were nicknamed CrackBerries, after the illicit and highly addictive drug.

Being on top was good for the company and its co-founders. They were strong willed and, for a time, were proven to be among the best in the game. Alas, they stuck to their guns for too long. When Apple introduced the iPhone, BlackBerry didn't do enough -- if anything at all -- to adapt.

While the company still had loyal followers, particularly in the business world, it essentially let competitors eat its lunch. Apple was the obvious beneficiary, but so was Google (NASDAQ: GOOG) and its popular Android operating system. Being on the other side of the equation wasn't particularly fun for BlackBerry or its shareholders.

The 10

Having slipped to also-ran status, the company's new BlackBerry 10 OS, and its accompanying new phone, are an attempt to get back into the big leagues. There are some decent touches in the new phone, though some question whether they're enough to make a difference. The slow rollout of the new phone has also raised eyebrows, since it won't be available in one of the company's key markets, the United States, until after it's out in a couple of other locales.

Regardless, the company's shares ran up in anticipation of BlackBerry 10's product launch. That a co-founder would take the opportunity to sell his shares isn't surprising. Moreover, stock gets sold for any number of reasons. So, it could have been a strategic move on Balsillie's part to find money for a new project.

Or it could have been a statement of his thoughts on the new product.

Similar to Apple

BlackBerry has some striking similarities to Apple. Unfortunately, most of them aren't good. Both Apple and BlackBerry have brought out transformational devices. However, Apple has historically proven more adept at repeating that level of success. BlackBerry did it only once.

Both companies, in the end, have to sell more of their own devices if they want to make more money. For Apple, sales figures are already high, so growth requires a notable increase in product sales. For BlackBerry, on the other hand, a low base gives it a better chance to impress.

The key thing, however, is that both companies keep things close to the chest. That means they are the sole determinants of their success or failure. For BlackBerry, which has become an also-ran in a highly competitive market, that's a big problem.

The Competition for Third

Right now, Google and Apple dominate the cell phone market -- Apple with its own products, and Google through its ubiquitous operating system. Samsung, while a notable competitor, is really building off of Google's position. There is no real competitor in third place. Thus, that's where the race is.

BlackBerry is hoping it can slide into that spot. However, it has stiff competition from the Nokia (NYSE: NOK) and Microsoft (NASDAQ: MSFT) combo. These two companies paired up to create the Lumia, a Nokia-designed phone based on Microsoft's mobile operating system.

The Lumia has gotten good reviews, and while sales have disappointed some in the United States, it has gotten off to a strong start for an also-ran product. The important thing to remember about the Lumia, however, is the purpose of the phone.

Nokia aimed to prove that it could still design a desirable phone. Without a doubt, the Lumia established that it hasn't lost its “chops.” For Microsoft, the phone was little more than a showcase of the power of its operating system. Once again, it got what it wanted.

The World is a Big Place

While the U.S. market is important, neither Nokia nor Microsoft need the Lumia to take off Stateside for the phone to be a success. For example, Microsoft has teamed up with Safaricom in Kenya and Bharti Airtel in Nigeria to run in-store training classes for people who buy the Nokia Lumia 510 or Nokia Lumia 620 Windows Phones. Moreover, Microsoft and Huawei are launching a new phone based on Microsoft's mobile operating system that is being specifically designed for Africa. And Nokia had a big advertising push, that it flubbed, in China for the Lunar New Year. Being in the United States is important, but it looks like that might just be to showcase both phone and operating system for other markets. 

Blackberry, interestingly enough, isn't launching its new phone in the U.S. market. It is heading overseas first. While this may seem like a good idea to build momentum in markets that are still under served, the company doesn't have the foreign stronghold that Nokia does in developing markets and certainly doesn't have the presence of Apple or Google in developed markets. So many consider this an error in judgment for Blackberry. While only time will reveal the answer, the company certainly doesn't have many chances to get this big release right. And a flub in a foreign market will likely hurt its chances in the key U.S. market.

BlackBerry is trying be both the number three operating system and an important phone maker at the same time. It's a harder task to pull off and the company doesn't have the same strengths as Microsoft and Nokia to back up the effort.

Commentary?

So, is the co-founder's stock move a commentary? It could be. As a shareholder, you should certainly err on the side of caution. If BlackBerry pulls off a comeback, there's a lot of money to be made. If it doesn't, there's a lot of money to be lost. Only aggressive investors should get on for the ride.


Reuben Gregg Brewer has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. 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!

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