7Digital Group PLC dives 12% as Blackberry Ltd shuts music store


BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) replaced 7Digital Group PLC (LON:7DIG) by Amazon.com, Inc. (NASDAQ:AMZN) app store, which pressed down the shares of 7Digital over 12% on Tuesday. Yesterday, 7Digital said that changes made by its main client would not affect its full-year numbers as have been expected by the market experts.

7Digital still in talks with BlackBerry

“7digital understands that it is BlackBerry’s intention, after the closure of its own storefront, to continue to provide its users with access to the music they have stored in their ‘lockers’ using the company’s services,” said 7Digital in its statement.

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The company, further, said that it is working on another deal with the Canadian firm for the purchase of new music, and any developments on this front will be informed.

Recently, BlackBerry Ltd reached a licensing partnership with Amazon.com, Inc. that will allow the Canadian firm to offer around 240,000 Android applications from Amazon’s app store on its lineup of BlackBerry 10 devices this fall. Further, the company said that its music and video section would be closed on July 21st.

Following the deal with Amazon, BlackBerry will be able to offer a range of consumer-focused apps to its devices and will be able to focus more on developing enterprise and productivity application.

BlackBerry 10 customers can access popular Android apps such as Groupon, Netflix, Pinterest, Minecraft and Candy Crush Saga on their BlackBerry devices this fall. Google’s Android is being used in more than a billion phones and tablets. Users will be able to access these apps, when BlackBerry upgrades its operating system to 10.3.

What analysts think?

According to analyst Lorne Daniel at finnCap, the move from BlackBerry is not surprising considering the company’s struggle and shift towards an enterprise market. The Canadian firm is 7digital’s biggest client, but “was in any case expected to be overtaken by the recently announced deals with ROK and Guvera.”

Wells Fargo analyst Maynard Um said, “While this will widen the BB10 app ecosystem, the consumer smartphone environment still remains challenging.” Um agrees that the steps are positive for the company, but customer’s reaction are still to be seen.

Ever since John Chen has arrived in the company as CEO, BlackBerry is making strategic efforts to transform itself into a service company. According to the analysts the company is just heading in the right direction, but the outcome is not sure yet. BlackBerry shares have surged 30% year-to-date, significantly outperforming the S&P 500?s 6% increase in the same time frame.