BlackBerry’s flagship Android device, the Priv, is very close to release, and the company’s decision about whether or not to continue with its smartphone business will depend on how this device fares in the market. If it fails at driving sales, the Canadian firm’s smartphone production could come to an end.
Last attempt at handset business?
The BlackBerry Priv is a very ambitious project from the Canadian firm as it combines the highly reliable security and productivity features of BlackBerry with the full version of Google’s Android OS. The Canadian firm is hoping its focus on privacy, which is a matter of concern with Android users, will drive users towards it. With the Priv, users get a pre-loaded app that keeps a check on other apps and reports how much those apps are accessing their personal data and location.
Seth Klarman: Investors Can No Longer Rely On Mean Reversion
"For most of the last century," Seth Klarman noted in his second-quarter letter to Baupost's investors, "a reasonable approach to assessing a company's future prospects was to expect mean reversion." He went on to explain that fluctuations in business performance were largely cyclical, and investors could profit from this buying low and selling high. Also Read More
Brian Colello, a Chicago-based analyst at Morningstar Investment Services believes the Priv could be the last from BlackBerry. “We’ve seen new products come out for the last couple years, BlackBerry’s trying to get a hit with any form factor, any price point and now it’s with a different operating system,” the analyst said.
BlackBerry needs one hit
Colin Gillis, an analyst at BGC Financial LP, told Bloomberg that if the Priv is able to outsell the Passport and the Classic, then the Canadian firm may keep its handset business running. “It doesn’t take a lot of phones to really move the needle for this company,” said Gillis, adding that the company has been lowering its “break-even level for the hardware side to stay in business,” but sales are not matching it.
John Chen took over the lead at BlackBerry about two years ago, and since then BlackBerry has released several devices that all have failed to drive sales for the company. Looking at the declining smartphone sales, Chen on numerous occasions stated that he will quit making phones next year if the division does not reap profits for the company.
BlackBerry’s software business has a higher margin, and therefore, the company is focusing more on it as its global smartphone share reduces to less than 1%. The smartphone business contributes 40% of revenue to the company, and therefore, Chen has held onto this business as he makes efforts to turn around the company’s fortunes.