What Does BlackBerry Tell Us About the Future of Tech?

Chris 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) is still struggling, and the company’s most recent earnings release confirms it. Despite the release of the highly anticipated touchscreen model of its flagship line, the company managed to ship just 6.8 million phones for the quarter.

The only real upside to the release is that it seems the launch of the BlackBerry 10 platform has managed to turn around the revenue decline in three of the company’s four business regions. Still, it isn’t much of an upside. The company reported the aforementioned 6.8 million phones for the quarter with a $0.13 per share loss on $3.07 billion in revenue. This fell well short of Wall Street’s expectations of 7.5 million phones and an average estimated profit of $0.08 per share on $3.37 billion in revenue.

It seems BlackBerry has fallen even further behind its competitors, despite bringing the smartphone category to the forefront of mobile communication. What can the decline of BlackBerry tell us about the future of big tech?

First let’s examine BlackBerry’s decline, which most will tell you can be traced back to the meteoric rise of Apple’s (NASDAQ: AAPL) iPhone and Google’s (NASDAQ: GOOG) Android operating system. Looking at market share data provided by IDC, it seems clear that if they didn’t cause BlackBerry’s demise, they certainly capitalized on it. Together they represent 92.3% of all smartphone operating system shipments in the first quarter of 2013.

What happened?

Innovation, or in BlackBerry’s case, lack thereof. The company, then known as Research in Motion, was content with its design trajectory and kept true to its course. And the result? Apple, Google, and the rest are eating BlackBerry's lunch.

The competition is rapidly innovating, initiating new projects at a breakneck pace, while pruning ones that fall short of expectations. Could these firms have learned from the mistakes of BlackBerry and others that met a similar demise?

What does this tell us about the future of tech?

It suggests that the future belongs to the innovators and not necessarily the current market leaders, which gives the companies two real choices: innovate or buy innovation. For instance, while Facebook (NASDAQ: FB) is widely regarded as the top social network, the company is floundering for direction and still hasn’t closed the gap between its current stock price and its IPO price.

Facebook did perform admirably over the first quarter of 2013, posting a 7% gain in net income over the previous year’s quarter, but investors are still waiting for direction. The company has initiated several new services, the bulk of which seem to be knee-jerk reactions to the services developed by competitors. Poke, the firm's SnapChat clone, has had little traction. Facebook Places, a Foursquare competitor, has been a flop thus far. And Facebook's Instagram competitor was basically dead on release. It seems as though Facebook is on the defensive, opting to continually play catch-up with the competition rather than looking to lead. Is it coincidence that the company’s stock has languished below the IPO price?

On the other hand, Google and Apple have proven their willingness to create new categories and to significantly improve existing ones. Apple seems content on focusing on the next step of innovation, having been rumored to be working on an Apple TV as well as a smart watch. Apple has recently been filing for the iWatch trademark in numerous countries, including Japan, Russia, and Mexico. The company also recently released its own music streaming service, iRadio. Google has adopted an even more radical approach, working simultaneously on near term innovations and long-term ones, like self-driving cars and other far-reaching plans.

The second option, buying innovation, is equally viable, as evidenced by Google’s success with YouTube, Facebook’s with Instagram, and a myriad of other smaller acquisitions. Yahoo! (NASDAQ: YHOO) and its CEO Marissa Mayer have been on a buying spree, looking for innovative companies with talented designers. The highest profile acquisition by Yahoo is Tumblr, which the company acquired for $1.1 billion in May. One way or the other, it is clear that innovation is the lifeblood of a strong tech company.

Both approaches have a downside; they consume lots of capital. Not every project will be a success. Nor will every acquisition, so cuts will have to be made. Yahoo! has recognized this, just recently pruning itsflock of services and cutting those that are no longer viable. Google is also no stranger to this, routinely culling its services, the most recent to fall victim being the much-loved Google Reader.

Another viable option, though fraught with its own issues, is buying innovative companies and using them as the catalyst to maintain a dominant position. Facebook is no stranger to this, as demonstrated by its purchase of Instagram to maintain dominance of the social space. Yahoo! CEO Melissa Mayer has been on a buying spree, snapping up startups and looking to increase the company’s talent pool.

Recently, Google has been rumored to being playing catchup with Apple, but even this is much more proactive than Facebook’s approach. In the end, I think the companies that are willing to embrace change or even bring it about will be the winners in the long run. To turn to a sports analogy, the best defense is a strong offense. Regardless of the recent decline in Apple’s stock, if history is any indicator, Apple and Google should outperform both Facebook and BlackBerry.

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Chris Moore has no position in any stocks mentioned. The Motley Fool recommends Apple, Facebook, and Google. The Motley Fool owns shares of Apple, Facebook, and Google. 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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