Is BlackBerry Dead in the Water?

A blog post from yesterday asks the question, “Would you say that BlackBerry is pretty much dead in the water at this point or is there hope left for the struggling Canadian company?”

The question is a good one. In the first quarter of 2009, BlackBerry had  55.3 percent of the US smartphone market and 20.1 percent of the global smartphone OS market; as of the last quarter of 2016, BlackBerry’s share of global smartphone sales had fallen to 0.048 percent. The company’s revenues fell from a peak of $19.91 billion in FY2011 to $2.16 billion in FY2016. It’s operating income and net income have been in negative territory since FY2013. It’s stock price went from $138.87 on April 30, 2008 to $7.45 as of today. In September of last year, BlackBerry stopped making its own phones.

So, yes, a case can be made that BlackBerry is “dead in the water” or very nearly so.

However, I believe that 2017 and 2018 will see a modest resurgence of the company, albeit not to levels that we saw before the iPhone and Android devices began eating BlackBerrys for lunch. Here’s why:

  • BlackBerry isn’t really a smartphone company anymore, but is transforming itself into a software and cyber security company. If they’re successful in doing so, that will turn their 30-something margins into 70-something margins. The company’s financial results are at least hinting that margins are going in the right direction.
  • BlackBerry still has a very good security architecture for mobile devices, one that many decision makers should (and, I believe, will) seriously consider as mobile devices increasingly access sensitive corporate applications and data repositories. BlackBerry’s DTEK technology offers robust user control over privacy and that’s going to be important for many enterprise decision makers.
  • While BlackBerry’s market share in the US and many other markets is really, really poor, the company is still doing reasonably well in places like Indonesia and in some key verticals, such as financial services. For example, a major US bank is standardized on BlackBerry mobile technology, as is HSBC, among others.
  • BlackBerry is increasingly focused on markets that are quite far afield from its traditional phone business. For example, BlackBerry Radar is the company’s first IoT application and is designed for asset tracking, currently in use by a major Canadian trucking firm. BlackBerry QNX, a real-time operating system focused on the embedded systems market, is currently used in 60 million cars worldwide (and replaced Microsoft Sync at Ford). BlackBerry has some interesting and innovative solutions focused on addressing enterprise BYOD/C/A concerns.

The bottom line is that BlackBerry is nowhere near out of the woods, but is definitely showing signs of life. John Chen has done a good job at starting to turn the company around, there is promise in several of BlackBerry’s key markets, and the company has a decent base of working capital. I have some confidence that in a couple of years BlackBerry will see something of a resurgence.

The (Sometimes Dangerous) Power of Perception

I had a conversation with someone this morning that suggested I join a customer advisory board. He recommended it, in part, over a board of directors because, as he put it, the latter takes more in-person time and “it’s difficult to get to other places from Seattle. For example, it would be difficult to get to a place like Omaha.”

This individual’s perception about getting to and from Seattle was right — perhaps 15 to 20 years ago — but that’s no longer the case. For example, I fly Alaska Airlines for most of my business travel and to about 98 percent of the places I travel in the US, Alaska has a direct flight. Plus, in the 26+ years I have been flying Alaska, I have had only three connecting flights — twice to Orlando and once coming back from Las Vegas. That’s three flights out of my too-numerous-to-count flights on Alaska in more than 26 years!

The perception of Seattle as a distant outpost is shared by many, particularly NFL commentators who will periodically tell viewers about the difficulty encountered by teams coming “all the way out” to Seattle. But looking at actual data reveals that for the Jets or Giants to visit the Seahawks they would fly 146 fewer miles than if they were visiting the 49ers. If the Patriots visited the Seahawks, they’d fly 115 fewer miles than if they visited the Rams.

So, perception is often wrong and it has consequences. Much more seriously than the misperception of Seattle as out somewhere past Siberia is the perception by many that the cloud is less secure than on-premises solutions. For example, you can read about the “insecurity” of the cloud, or decision makers’ perception of its insecurity, here, here, here, here and here. However, an examination of the biggest and most damaging breaches of highly sensitive or confidential data over the past several years reveals that the vast majority of these were exfiltrations of data from on-premises systems, not those in the cloud. Even as far back as 2012 the Alert Logic Fall 2012 State of Cloud Security Report noted that users of service provider solutions experienced less than half the number of security incidents than users of on-premises systems. More recently, Infor concluded that, “Cloud vendors typically offer a much higher level of data center and virtual system security than most organizations can or will build out on their own.”

While on-premises solutions can be highly secure, data stored in the cloud is generally. more so. Cloud providers enjoy economies of scale in rolling out security capabilities that most organizations with on-premises systems cannot achieve. The cost of security for cloud providers is generally much lower on a per-customer basis than it is for those that manage security in-house, allowing cloud providers to do more on a dollar-for-dollar basis. Cloud providers suffer from insider threats much less often than do their on-premises counterparts. And, the very existence of cloud providers is much more dependent on maintaining the security of their customers’ data than it is for companies that maintain their own systems on-premises, giving cloud providers the stronger incentive to get security right.

Within the next few weeks we will be publishing a white paper focused on cloud security in which we will be exploring the key issues that decision makers should understand as they consider security in the cloud vs. on-premises.

And, Alaska offers a daily non-stop to and from Omaha.