After quite possibly the worst week in BlackBerry’s history, investors were offered a glimmer of hope – the next best thing to a takeover bid when Fairfax Financial Holdings Ltd. announced it plans to purchase the struggling tech giant’s remaining shares and take it private. Although it’s far from a done deal, going private will allow BlackBerry to regroup without the pressure of constantly meeting quarterly results.
How the Mighty Have Fallen
The last several years have been a rollercoaster ride for BlackBerry investors to say the least. The once mighty smartphone manufacturer’s stock has fallen off a cliff. BlackBerry, which once was valued at $140 a share, is now trading at just below $10 a share with no end in sight – ouch!
It’s been a story of too little, too late for BlackBerry. Their latest device, BlackBerry 10, was supposed to help reestablish the firm as a contender in the smartphone market. Instead BlackBerry finds itself ever further behind the competition, well below the key five per cent market share many analysts claim it needs to survive.
BlackBerry suffered perhaps its biggest setback on Friday when it announced a write down of nearly $1 billion mostly due to unsold inventory of its Z10 smartphone. To stay afloat, the languishing smartphone maker will need to make its biggest round of layoffs in history. A whopping 4,500 jobs will be lost worldwide – that’s 40 per cent of its workforce!
What Went Wrong?
BlackBerry’s struggles didn’t just appear overnight. The troubled tech firm’s problems can be traced back at least four year ago. In 2009 BlackBerry sat atop the smartphone market with a comfortable 51 per cent market share in North America – today it has a market share of only 3.4 per cent. So what’s changed in just 48 short months?
When it comes to new technology, the telecommunications industry moves lightning fast. Instead of focusing on the next BlackBerry device, former co-CEO Jim Balsillie seemed to be preoccupied with his dream of bringing an NHL franchise to Hamilton. While competitors like Apple and Samsung released successful smartphones and invested heavily in phone apps, Blackberry took its sweet time coming out with a new smartphone, as their stock price and market share took a nosedive. For a firm on the brink of failure, you’d think there’d be more urgency with the launch of BlackBerry 10 – instead it was plagued with delay after delay, a common theme for BlackBerry.
What’s Next for BlackBerry?
BlackBerry’s downfall is reminiscent of tech giant’s Nortel’s failure over a decade ago. Hopefully the outcome won’t be as grim. With the loonie trading near parity, manufacturing jobs continue to move south of the border. The high tech industry offers an excellent opportunity to replace those lost jobs.
BlackBerry is one of the only remaining national champion in the high-tech industry in Canada. These layoffs will undoubtedly be felt worldwide, but nowhere worse than Waterloo. Although there are plenty of promising high-tech startups in Waterloo, it will be next to impossible to replace so many lost jobs overnight.
BlackBerry’s Path to Success
BlackBerry’s decision to get out of the consumer market is long overdue. BlackBerry, which was once considered trendy with young adults and a mainstay among businesspeople, has been left in the dust by iPhone and Android smartphones. If there’s a lesson to be learned from the failure of BlackBerry 10, it’s that the smartphone provider can no longer be everything to everyone. To be successful, BlackBerry needs to focus on niche markets where it has a fighting chance of coming out ahead.
It Still Has Its Strong Suits
Despite its setbacks, BlackBerry is still known for the highest level of security on the planet. By focusing on enterprise customers that value privacy and data encryption, it stands a better chance of survival. Another area of growth could be licensing its software to rivals like Apple and Samsung, as well as government agencies. Although $9 a share is far from a premium for shareholders, it’s better than bankruptcy. By going private hopefully BlackBerry can reform its strategy and once again become a dominant player in the tech industry in the years to come.
Do you still use a BlackBerry device? Are you considering a switch due to the sale?