BlackBerry Ltd (BBRY) Smartphone Battle May Be Over


BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shares have gained more than 50% over the past three months. John Chen has come up with a turnaround plan that struck a cord with investor sentiment. BlackBerry entered a five-year agreement with Foxconn Technology Co., Ltd. (TPE:2354) to manufacture low-end smartphones starting April 2014. But Kofi Bofah of Onyx Investments says that almost nothing has changed except constant drumbeats of asset sales, layoffs and convertible bonds diluting shareholder value. Last month, Fairfax Financial Holdings exercised the option to purchase additional $250 million of debentures.

Microsoft threatens BlackBerry’s smartphone aspirations

BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s BB10 OS was recently named among the biggest flops of 2013. The company still has a good position in emerging markets. But its upcoming smartphone codenamed “Jakarta” may be too little, too late. Currently, the iOS and Android duopoly has an iron grip on the smartphone OS market, and Samsung Electronics Co., Ltd.(ADR) (LON:BC94) (KRX:005930) sells about 33% of global smartphones.

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Meanwhile, Microsoft Corporation (NASDAQ:MSFT) has almost completed its acquisition of Nokia Corporation’s handset business. It indicates the emergence of a third player in the fiercely competitive smartphone market, at the expense of BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB). The Redmond-based software giant generates about $30 billion in annual free cash flow from operations. Its Xbox, which was a laggard a few years ago, has emerged as a big challenger to the PlayStation 4. It shows that Microsoft is willing to throw cash at any business where it aims to strengthen its position. According to CounterPoint, Nokia Asha 501 was the tenth best-selling mobile phone in October worldwide.

BlackBerry could be too late in emerging markets

Talking about emerging markets, Lenovo Group Limited (ADR) (OTCMKTS:LNVGY) (HKG:0992) has purchased Motorola from Google Inc (NASDAQ:GOOG) for $2.91 billion. The Chinese company already has a solid presence in its domestic market. And it aims to penetrate into other countries with the help of Motorola. The massive success of Moto G in India shows that the Motorola brand can still charm customers in emerging markets.

In the U.S., the BB10 platform is used by a mere 3.5% of subscribers, according to comScore. The iOS-Android duopoly jumped slightly to control 93.1% of the U.S. market share. Changing equations suggest that BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) could be left far behind by Microsoft Corporation (NASDAQ:MSFT) and Lenovo Group Limited (ADR) (OTCMKTS:LNVGY) (HKG:0992)

BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shares were up 1.27% to $9.95 at 11:14 AM EST.