Comeback kid BlackBerry aims high but will it succeed?

  • Pivot to software, services, licensing bearing fruit, but for how long?
  • Growth to come from broadening security products and on next -gen security

 

Comeback kid BlackBerry aims high but will it succeed?

 

MENTION the name BlackBerry and you’ll probably recognise it as the iconic keyboard-based smartphone that ruled the corporate world for some two decades since the 1990s. 

But as successful as the Waterloo, Ontario-based company was at introducing the world to the concept of push email and secure communications via its BlackBerry Messenger (BBM) platform, Canada’s most successful mobile technology export succumbed to a litany of problems, which caused industry watchers to wonder whether it was going to go the way of the dodo, as did another Canadian company, Nortel Networks Corp.

The fall from grace for Research in Motion (RIM) Ltd – the owner of the BlackBerry brand – and which has since been renamed BlackBerry Ltd – has been widely reported on.

One in-depth article by the Canada’s Globe and Mail, was particularly damning in its analysis.

In a nutshell, the investigative piece argued that the company’s fall from grace did not happen overnight and was made up of a huge confluence of complex factors.

Some of these key factors, according to the 6,300-word article, include the company’s complicated corporate structure of having two co-chief executives, which led to strategic decisions being delayed; a failure to respond to the rising tide of competition, namely Apple and Google; and missteps in choosing compatible engineering platforms (both hardware and software).

Other issues include the over-reliance on its BBM messaging services; failure to introduce the right products at the right time; and disagreements between Blackberry founder Mike Lazaridis, and the then chief executive officer (CEO) Thorsten Heins and his lieutenants, among other issues.

BlackBerry finally hit its nadir when it declared a close to US$1 billion (RM4.22 billion) loss for its second quarter ending August 2013. Its launch of the Z10 smartphone was a flop, selling only 5.9 million units that quarter, less than the number of smartphones sold by Apple the weekend before its August earning call, according to Forbes. The company's revenue almost halved, to US$1.6 billion, while its cash pile also fell by US$500 million to US$2.57 billion, Forbes noted. (US$1 = RM4.22)

This prompted a drastic move by its then largest shareholder Fairfax Financial to take the company private for some US$4.7 billion. However, after being advised not to take the company private, Fairfax decided against doing so but instead led a group of investors to inject US$1 billion cash into the troubled smartphone maker in a bid to revive its fortunes.

Part of the deal required its then CEO, Thorsten Heins, to leave the company with a hefty payout estimated at US$22 million. Meanwhile, John Chen (pic, below), the previous CEO of SyBase was brought in to steer BlackBerry out of troubled waters.

Resuscitating the dodo?

 

Comeback kid BlackBerry aims high but will it succeed?

 

Chen was no stranger to corporate turnarounds. The 62-year-old British-Hong Kong native is a proven executive, having a track record of turning around database company Sybase Inc, which had been outgunned by leading industry giant Oracle Corp in 1998.

Soon after being appointed as CEO at Sybase, he began to pivot the company away from mainstream database products and began restructuring Sybase around mobility and analytics. Sybase’s turnaround took time but he was seen over the years by the industry as largely succeeding.

After a decade or so, Chen managed to turn its fortunes around by 2010, when it then attracted enterprise apps giant SAP SE to buy Sybase for US$5.8 billion.

Immediately after succeeding Heins in November 2013 as the CEO, Chen moved quickly to reassure his staff and the markets that BlackBerry was committed to reclaiming its success in the corporate world.

In what many industry observers believe is the same broad strategy Chen used with Sybase, Chen’s priority for BlackBerry was to look at how he could pivot the company away from a hardware maker of smartphones towards leveraging on what he believed were BlackBerry’s crown jewels – security software and services.

In the next two years after he took over, he sought to keep the company afloat by selectively launching some smartphones and stepping away from manufacturing handsets but still cutting deals to license the BlackBerry brand to other players such as TCL Corp, PT BB Merah Putih in Indonesia and Optiemus Infracom Ltd in India.

He also sought to expand BlackBerry’s enterprise security software and services into other verticals in regulated industries such as healthcare, financial, and legal services space. He exploited the then nascent automotive space by pushing its QNX software as a middleware layer between front end interfaces such as Apple’s CarPlay, a tactic that has yielded some gains.

Three and half years after he took over BlackBerry, Chen and his executive management team have put in place a strategic plan, which seems to have yielded results.

In its 2018 Q2 earnings report ending Aug 31, BlackBerry’s net income was US$19 million, following a loss of US$371 million for the same period a year before. The company also reported a US$2.5 billion in cash balance as at the end of fiscal Q2, ending Aug 31.

Neil Shah, research director at Counterpoint Research, said Chen is generally regarded as a good corporate leader and his strategy for moving away from hardware to software has allowed BlackBerry to focus on its core competency, which is security and developing enterprise-grade solutions and services.

“BlackBerry is recovering steadily as it pivots to a software business model, which includes licensing the brand as well as outsourcing the intellectual property of the BlackBerry hardware procurement, design, production, marketing and sales to partners.

“This is a prudent move considering the Canadian vendor has scaled back significantly its hardware business and is no longer providing enough scale to remain profitable,” he told Digital News Asia (DNA) in an email interview.

Next page: The tough get going and keep going

 

 
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