Not too long ago, BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) was the most preferred choice of professionals and organizations seeking strong security features, which is why corporate and government customers have stayed with the Canadian smartphone maker. But BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) has started losing its loyal customers now, at an alarming rate.
BlackBerry’s enterprise customer base shrinking
The company has already seen consumers turning away in droves. And before it could refocus its attention on government agencies and business customers, they too started leaving the company for iOS, Android and even Windows Phone devices. Macquarie Group analyst Kevin Smithen said that BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) has lost its ability to penetrate the consumer market. And its enterprise customer base is no longer big enough to boost unit sales. Kevin Smithen believes that the last option for BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) will be a liquidation or a breakup.
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Many government agencies including the National Oceanic Atmospheric Administration, the Bureau of Alcohol, Tobacco, Firearms and Explosives (now called the Tax and Trade Bureau), the National Transportation Safety Board, and the U.S. Immigration and Customs Enforcement have already dumped BlackBerry smartphones.
Rivals attracting business customers
After beating BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) in the consumer market, its competitors have increased their efforts to attract business customers. Private companies have started switching to other devices. Recently, The Home Depot, Inc. (NYSE:HD) switched to Apple Inc. (NASDAQ:AAPL)’s iPhones from BlackBerry. The Mall of America switched from BlackBerry to Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s Lumia 920. According to research firm IDC, for the first time BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shipped fewer smartphones to business customers around the world than Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) and Apple Inc. (NASDAQ:AAPL).
FBR Capital Markets analyst Scott Thompson said that the company management has underestimated the problem. Analysts partly blame cost cutting measures at corporations, as many enterprises have launched a BYOD (bring your own device) policy to reduce costs. Moreover, switching from BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) smartphones eliminates fees the company charges for using its software.
Many people on Wall Street were hoping that the launch of the BB10 operating system would help revive the company, but the devices running on BB10 operating system aren’t running as well as expected. The company’s first quarter earnings came well below analysts’ expectations.
People want a healthy mix, not just security
Company executives, including CEO Thorsten Heins, continue to reiterate that a turnaround takes time. Certainly Q1 earnings offered little evidence of a turnaround. The company’s share in the U.S. smartphone market declined from 43% in 2010 to less than 4.8% in May. BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s subscriber based also shrank from 76 million to 72 million.
BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) has always said that no company can match BlackBerry’s security levels. But rivals are improving security measures and rapidly overtaking BlackBerry standards. And security alone isn’t sufficient to maintain a viable business. Apart from security, users also want devices that are fun and trendy, says Andrea Chang of the Los Angeles Times. Even corporate professionals don’t just want the best security features, they want a healthy mix of other things as well.
BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shares have declined 24% this year so far. Shares were down 2.36% to $8.67 at 2:44 PM EDT.