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 Future of Computing is 40 Years Ago

The history of computing can be oversimplified as follows:

  • 1950s through the 1970s: Mainframes, in which massive computing and data storage resources were managed remotely in highly controlled data centers. Intelligence and data were highly centralized, accessed through dumb terminals.
  • 1980s through the 1990s: Client-server computing, in which intelligence and data moved to the endpoints of the network as CPU power and storage became dramatically less expensive.
  • 2000s: Cloud computing, in which much of the intelligence and data storage is moving back to highly controlled data centers, but with lots of intelligence and data still at the endpoints.

I believe the fourth major shift in computing will be to revert back to something approaching the mainframe model, in which the vast majority of computing power and data will reside in data centers that are under the tight control of cloud operators using both public and private cloud models.

Smartphones now have more computing power than most PCs did just a few years ago, albeit with much less storage capacity. While the smartphone does not provide corporate users with the form factor necessary to do writing, spreadsheets, presentations, etc. with the same ease that a desktop or laptop computer does, the combination of a smartphone’s CPU horsepower coupled with a monitor and keyboard that serves as a dumb terminal would provide the same experience as a desktop or laptop. As proposed by Robert X. Cringely a couple of years ago, I believe that the corporate PC of the future will be a completely dumb terminal with no Internet connection or local storage. Instead, it will have only a monitor and keyboard and will use the smartphone in the corporate user’s pocket as its CPU and connectivity.

Why? Three reasons:

  • It will be more secure. Data breaches are an unfortunate and increasingly common fact of life for virtually every organization. Many data breaches are the result of simple mistakes, such as laptops being stolen out of cars or left behind at TSA checkpoints, but many data breaches are the result of hacking into on-premises, corporate servers that are insufficiently protected. A review of the most serious data breaches reveals that the vast majority of data breaches have occurred from on-premises servers and other endpoints, not cloud providers. Yahoo!’s recent and massive data breach is more exception than rule, since cloud data centers are typically more secure than those on-premises behind a corporate firewall.
  • It will be cheaper. Instead of providing a laptop and/or desktop computer to individual users, companies will be able to provide a much less expensive dumb terminal to their users that will use a smartphone’s intelligence and computing horsepower to provide the laptop or desktop computing experience transparently. Users will be able to sit down at any dumb terminal, authenticate themselves, and enjoy a laptop or desktop experience. Because storage will be in the cloud, there will be no local storage of data, reducing cost and enhancing security. And, if the dumb terminal is stolen, a company is out only a few hundred dollars, not the millions of dollars for which it might be liable if data is breached from a stolen or otherwise compromised device.
  • It will be more controllable. Instead of users having access to two, three or more computing devices, users can be equipped with just one corporate device, a smartphone, that will enable all of their computing experiences. When the employee leaves the company or loses their device, disabling access to corporate data will be easier and more reliable.

In short, the future of computing will be conceptually similar to what our parents and grandparents experienced: computing intelligence and data storage in some remote, secure location accessed by dumb devices (other than our smartphone).