Can This Smartphone Giant Surprise?
Mohsin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Apple (NASDAQ: AAPL) has redefined the smartphone experience with its iOS and iPhone. Only Google and Samsung have shown the ability to adapt and adopt this revolution with their Android devices. Due to this rise of iOS and Android, BlackBerry (NASDAQ: BBRY) has seen falling sales of its BB devices and declining service revenues. The company is trying once again to become relevant with its exciting new BB10 OS and a range of new devices. However, the market is highly competitive and a comeback needs more than just an exciting flagship device. BlackBerry has made some interesting moves and going forward investors can reap the reward of these smart decisions.
BlackBerry is not the only company struggling to make an impact in the smartphone industry. Microsoft (NASDAQ: MSFT) has been trying for years now to enter the smartphone OS industry. The company’s initial efforts utter failures but its recent WP8, launched in partnership with Lumia, has made an impact.
In terms of numbers, the Windows 8 platform has received limited success from WP8 but performed comparatively better on the tablet/ultrabook front. As compared to Microsoft, the efforts of BlackBerry to redefine its smartphone vision have been much more successful. While Microsoft is trying to build a new consumer base for WP8, BlackBerry has the luxury of an existing 80 million users of BB service.
These loyal users not only provide a constant stream of service revenue but are also potential candidates for an upgrade to newer models. This is the primary reason BB comeback efforts seem more realistic than Microsoft becoming a major player in the smartphone arena.
The growth slowdown in Europe and North America is forcing a number of companies to look towards the growing Asia and South American markets. While there is considerable growth in these regions, the consumer spending is much less than developed regions of the world. The players looking to drive growth from these regions are focusing on medium to low tier devices.
Google and Microsoft already are already targeting this huge market through their various smartphone partners. According to recent news, BlackBerry has also announced that, in July, it will launch the medium range Q5 devices. The Q5 will be available in Europe, Asia, Latin America, Africa and Middle East. The device will be an attraction for BB fans not willing to spend on high end device like Z10. There is market speculation that Apple has also decided to enter this lucrative market with a mid-tier iPhone. According to reports, the company will launch this along with iPhone 6/iPhone5s later this year.
Apple will launch the new iPhone devices by the end of this year. This launch will have a widespread effect on the entire smartphone industry. The iPhone 5 was not up to market expectations but still managed to out sell every competitor. There is still no confirmation if the new device will be name iPhone 6 or iPhone 5s. It is speculated that these upgrades could become part of the device:
i) Better speed and memory: Apple always upgrades its processors with every launch so more RAM and faster processor are a given.
ii) Thumbprint recognition: We are moving into the age of NFC and mobile banking, so device security has become a necessity. The new device will have thumbprint activation/recognition as an attraction to high-end clients.
BlackBerry has a 6 month windows to generate consumer interest in its new devices because once the iPhones hit the market, they will steal the show. The thumbprint security features can also be a headache for BlackBerry devices because they will attract business executives which are BB’s primary target market.
Over the years, BBM has been one of the biggest attractions for consumers. In another major move, the company is opening its BBM service to rival devices. The financial benefit of this move as compared to the loss of exclusivity should be a point of concern for investors. The primary aim of this strategy is to allow loyal BB users to interact with their contacts on iOS and Android.
The limited number of applications of the BB1o platform is a weakness for the platform. There are reports that pretty soon all Android applications will become compatible with BB10. This will give a big boost to BB sales as it will combine the reliability of BB10 with user friendliness of Android.
The Blackberry has rallied in the last few months due to positive market perceptions about the new BB10 operating system. Although iPhone and Android dominate the marketplace, fortunes can change pretty quickly in the smartphone industry.
To become a major player once again, BlackBerry needs to dominate in the high growth Asian markets. The Q5 and BBM portability are positives steps by the company and demand better valuations for the stock. The results of this quarter will give a valuable insight into long term potential of the BB10 and BlackBerry as an investment. Investors should ‘hold’ and wait for solid device data before going long Blackberry.
It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks?" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged by the five kings of tech. Click here to keep reading.
Mohsin Saeed has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple 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!