Will Facebook be the new Outlook for Blackberry Smartphone?
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Research in Motion (NASDAQ: BBRY) is looking to split in two, separating its handset division from its messaging network and selling off the struggling Blackberry hardware business. The news is not yet confirmed but there are chances of Facebook (NASDAQ: FB) or Amazon (NASDAQ: AMZN) as its potential buyer.
Reasons for the Split
The stiff competition posed by Apple (NASDAQ: AAPL) and Samsung is the main reason for the split. They have taken the maximum share of the market with as much as 55% of the market share and 90% of the market profit in the first quarter. Also, with the possible entry of Google (NASDAQ: GOOG), Microsoft and Amazon will gear up for the competition.
If we analyze the data of RIM, the outlook does not look to be promising. Despite the new releases of smartphones, the company is struggling to retain market share. Here is a look on the devastating figures of the company in the past few quarters:
As we can see, revenue has been down consistently in the past few quarters and the net income has fallen even at a faster rate. The last quarter they reported a net loss of $125 million.
RIM has hired JPMorgan and RBC Capital to look at its strategic options. The possible ways of bailout for the company from this struggling performance are:
Licensing Deals: RIM could possibly license its deal of Blackberry to some company. The benefit would be that they could retain the luxury of keeping the profits from the handset, while at the same time reducing the cost of selling and marketing expenses that have been hurting their pocket in the last two quarters.
Partnership: Here, the benefit will be that they could possibly use the marketing division of its partner to channel smartphone sales. Especially someone like Facebook would be the best deal. It would allow direct access to their 900 million user base.
Sell off/Split up: They could possibly just sell off their struggling hardware division. But companies like Facebook and Amazon are looking forward to buy their services business. The service business is essentially the unique global network. The network allows RIM to provide unusually high levels of security for corporate and government users, who install special servers in their computer systems and who pay license and technical support fees.
The decision has been made a bit late, but better late than never. Instead of just firing people and creating panic, which has already resulted in the downfall of the stock over the past year or so, they need to make strategic moves to challenge their competitors.
Has BlackBerry lost the magic touch that kept its QWERTY touting smartphones atop the market charts for so long? Can they bounce back? Let us know your thoughts.
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