Blackberry (BB) seems to be a taboo word in the world of technology recently. BB – in its heyday – was a giant; it could not be touched. “Too big to fail” is the phrase that came to mind when people used to talk about Blackberry, but oh how the mighty have fallen! A point to make here – an important one – is that NO company is too big to fail – there is no such thing; it doesn’t exist. The only way a company has any right to say that it is too big to fail is if the government bails it out; example: RBS, 80% owned by the UK government (Reuters 2013)
Where did the problems start? Well the problems actually started with BB’s success. There was a particular successful strategic manoeuvre that didn’t sustain a competitive advantage for BB and allowed other companies to dominate the market (Tech Vibes 2013). Product Development is the strategy in question.
Igor Ansoff is known as the father of Strategic Management. He put forward some brilliant ideas such as economic efficiencies which make 2+2 = 5. Ansoff is known world-wide for his Product/Market Matrix. Market Penetration, Product Development, Market Development and Diversification are the 4 elements in Ansoff’s matrix (Business Dictionary 2014). I will not define any other element besides the one we are looking at, which is Product Development. *Side-note* please do read about all the areas of his matrix.
Product development: “a growth strategy where a business aims to introduce new products into existing markets. A successful product development strategy places its marketing emphasis on: R&D, customers’ buying trends/needs, market saturation – usually companies want an open market with very few competitors or even better yet, to carve out a new market” (Business Dictionary* 2014). This is what BB has done. It essentially moved from a ‘business person’s phone’ to an ‘everyday person’s phone’, this group also covering ‘business people’ (BBC 2013). This boosted profits for a good few years, but doom lay ahead.
“Doom” came in the form of the technological giants Apple, Microsoft, Samsung and Nokia making a charge at BB indirectly by launching highly popular phones. As we’ve seen with Siemens and with Nokia before its latest resurgence: big telephone companies can fail! Apple is top the field because it is innovative (Innovation Main 2014). Innovation trumps a one-time Product Development process and results in a lasting competitive advantage every time.
So what’s the story now? I think it looks to be all bad news on the surface, but underneath there lies a rare opportunity – especially for long-term investors – to secure a great return.
5 reasons why people do not like BB and would not invest:
- Phones are not ‘cool’ any more – especially in the UK/USA (Yahoo 2013). It actually still does well in business phone areas and Asia (Berry Review 2013).
- 4,500 being laid off this year. 4 x as much as the company previously said. This is will cost $400m (CCN Money 2013).
- $965m 1st quarter loss (Telegraph 2013).
- Stock price now, stock price then (Google Finance 2014).
- Google, Apple, Microsoft, & Samsung are doing much better than Blackberry (The Motley Fool 2013).
Before I set out my 5 reasons in a short-list fashion, I will first explain a few reasons in a bit more depth. BB has been beaten to a pulp. But what people forget is that it is still known world-wide. The company’s phones may be doing poorly in the west but are dominant in emerging markets with a very bright future (Bloomberg 2013). BB now has a new CEO who is restructuring the group, downsizing it and focusing on core-efficiencies – going back to basics: the business phone model (The Verge 2013). During my investing journey so far I’ve realised that most investors are emotionally unstable (may seem rude but nonetheless, it is true) with regard to their. They approach it like gamblers do with their gaming: they want quick easy wins and will not bet on a company if it goes through hard times. Warren Buffet – the greatest investor ever in many investors’ opinions, including myself – is a long-term investor who thrived on buying companies that were going through hard times and are now great: IBM/Coca-Cola, etc. (Wall Street Journal 2014). The stock price has plummeted but based on the reasons above, I can easily see BB trading at way over $30 per share in the next 10 years.
5 reasons to invest in BB:
- John Chen – an excellent new CEO who has benefited BB hugely so far (Investor Place 2014).
- BBM – has been licensed to other Android users and BB is looking to possible sell this service (Blackberry World 2014).
- Patents and cash – BB has a value of $12 per share just on these two bases
- Stock Bull – when BB has sorted its problems that $7/8 will increase to $12 at the very minimum.
- It is going to be around for a long time since Blackberry Phones is BBRY’s main product (Blackberry Corporate 2014).
BBC, 2013. Blackberry 10: Expert views on Blackberry’s new smartphone system. [online]. Available at: http://www.bbc.co.uk/news/technology-21242606
Berry Review, 2013. Blackberry makes the Blackberry 9720 Official in Asia, EMEA and Latin America. [online]. Available at: http://www.berryreview.com/2013/08/13/blackberry-makes-the-blackberry-9720-official-in-asia-emea-and-latin-america/
Blackberry Corporate, 2014. Blackberry. [online]. Available at: http://uk.blackberry.com/company.html
Blackberry World, 2014. Blackberry Messenger. [online]. Available at: http://appworld.blackberry.com/webstore/content/3729/?lang=en
Bloomberg, 2013. Blackberry Focuses on Emerging Markets with Q5. [online]. Available at: http://www.bloomberg.com/news/2013-05-15/blackberry-focuses-on-emerging-markets-with-q5-corporate-canada.html
Business Dictionary, 2014. Ansoff Matrix. [online]. Available at: http://www.businessdictionary.com/definition/Ansoff-matrix.html
Business Dictionary*, 2014. Product Development. [online]. Available at: http://www.businessdictionary.com/definition/product-development.html
CNN Money, 2013. Oops! Blackberry even worse off than it thought. [online]. Available at: http://money.cnn.com/2013/10/02/technology/enterprise/blackberry/index.html
Google Finance, 2014. NASDAQ: BBRY. [online]. Available: https://www.google.com/finance?cid=663276&safe=strict
Innovation Main, 2014. Apple’s Innovation Strategy. [online]. Available at: http://www.innovationmain.com/Apple-eBook.html
Investor Place, 2014. Should I Buy BBRY Stock 2014? 3 Pros, 3 Cons. [online]. Available at: http://investorplace.com/2014/03/blackberry-buy-bbry-stock-3-pros-3-cons/
Reuters, 2013. Government readies banks for return to private ownership. [online]. Available at: http://uk.reuters.com/article/2013/06/10/uk-britain-banks-privatisations-idUKLNE95900220130610
Tech Vibes, 2013. Apple Takes Over as World’s Most Valuable Brand, Blackberry Falls off List for First Time. [online]. Available at: http://www.techvibes.com/blog/apple-blackberry-worlds-most-valuable-brands-2013-09-30
Telegraph, 2013. Blackberry Slumps as BB10 flops. [online]. Available at: http://www.telegraph.co.uk/technology/blackberry/10148389/BlackBerry-slumps-as-BB10-flops.html
The Motley Fool, 2013. NASDAQ: BBRY. [online]. Available at: http://www.fool.com/investing/general/2013/02/14/good-news-bad-news-for-blackberry.aspx
The Verge, 2013. Who is John Chen, Blackberry’s new CEO? [online]. Available at: http://www.theverge.com/mobile/2013/11/4/5065280/blackberry-interim-ceo-john-chen-profile
Wall Street Journal: Market Watch. Warren Buffet’s holding on to Coke, hasn’t soured IBM, and doesn’t see a market bubble. [online]. Available at: http://blogs.marketwatch.com/thetell/2014/04/23/warren-buffetts-holding-on-to-coke-hasnt-soured-on-ibm-and-doesnt-see-a-market-bubble/
Yahoo 2013. Blackberry, Like, so not cool, say young users. [online]. Available at: https://ca.news.yahoo.com/blackberry-not-cool-young-users-141428139–sector.html