BlackBerry bets on software to return to mobile spotlight
By Chantal Tode
November 5, 2013
BlackBerry is abandoning plans to sell itself
While BlackBerry is once again trying to execute a successful turnaround, this time the focus is likely to be more on rebuilding its strength on the enterprise side through software services than on trying to drive consumer hardware sales.
The BlackBerry brand has taken a beating over the past couple of years thanks to dwindling sales, repeated changings of the guard and failed previous turnaround efforts. The recent decision to abandon plans to sell the company and instead bring in a new CEO – John Chen, former CEO of database software firm Sybase – adds more urgency to the need for a strategy to quickly rebuild the company.
“Chen was a turnaround guy at Sybase, restoring the company to profitability, never looking back, and eventually selling a high growth business to SAP,” said Bob Egan, CEO and founder of mobile strategy consultancy The Sepharim Group, Falmouth, MA. “That is exactly the kind of leadership that BlackBerry needs.
“He's been looking for a chance to really build the unwired enterprise vision he's talked about since 2003,” he said.
“What I expect him to do is insure the health of BlackBerry's Network Operations Center, accelerate software systems development and create a new direction in mobile devices that in all likelihood will mean BlackBerry will not manufacture its own devices. Chen will likely first point the company into profitable and healthy verticals like financial, government and health.”
BlackBerry shares drop
BlackBerry said yesterday that it will abandon plans to sell itself and will instead raise $1 billion in funds and replace existing CEO Thorstein Heins with Mr. Chen.
The investment will come from FairFax Financial, which had wanted to buy BlackBerry outright, but may have not been able to raise the necessary funds, and other investors.
The news was not met well by the markets, with BlackBerry’s shares dropping by almost 17 percent by the end of the day yesterday.
BlackBerry announced plans to pursue a buyout in August after it became clear that BlackBerry 10, which was introduced earlier this year, but did not have the positive impact that the company was hoping for.
BlackBerry was slow to react to the switch to touch screens, an oversight that the new BlackBerry 10 operating system was meant to address.
However, BlackBerry is going up against strong competition in the consumer smartphone market from the likes of Apple, Samsung and Microsoft, who are all spending heavily to promote their own devices.
A pivot to software
In August, the company said it was pursuing a sale to help it accelerate the development of BlackBerry 10.
The hiring of Mr. Chen suggests that BlackBerry may be pivoting its strategy to instead focus more on the enterprise segment, which is where it strengths traditionally lay.
However, Apple and other manufacturers are increasingly making inroads into the enterprise sector.
Also, with the bring your own device to work trend continuing to grow, any handset manufacturer has to have a strong consumer-facing brand in order to compete successfully.
Mr. Chen has reportedly stated he does not intend to shut down BlackBerry’s handset business.
BlackBerry has achieved some traction with enterprises using BlackBerry servers as the core of a broader enterprise device management platform.
However, with few sales of BlackBerry 10 devices, that could start to be a hard sell going forward.
BlackBerry’s other main software offerings, QNX and BlackBerry Messenger, are not likely to generate enough revenue to bring the company back to growth.
“Fairfax’s investment will buy the company some time, which it badly needs, but the company needs a new strategy more than ever,” said Jan Dawson, chief telecoms analyst at Ovum.
“If Fairfax had taken the company private, it could have kept that strategy to itself,” he said. “But with BlackBerry remaining a public company, Chen and Fairfax Chairman and CEO Prem Watsa need to start communicating that new strategy very soon to inspire confidence in a turnaround.”
Chantal Tode is associate editor on Mobile Marketer, New York
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