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The shares of the newly branded BlackBerry (NASDAQ:BBRY) saw its shares fall by as much as 4.6% on 11th February after Home Depot Inc (NYSE:HD) announced the replacement of its BlackBerry Smartphone for its executives and managers with Apple’s (NASDAQ:AAPL) iPhones. This news is a big setback for the company struggling to maintain a hold on its corporate customers and government agencies. It also came at a bad time – a week after it launched its BlackBerry10 OS and phones. Corporate customers have been both the lifeblood and, more recently the life-line, for Blackberry.
Changing its name from Research In Motion Ltd. to BlackBerry, the company launched two new phones, a full touch-screen phone, the Z10, and — sticking to its more conventional design –a phone with its trademark keyboard, the Q10. Both phones were launched on January 30. The new phones are an attempt from the company to win back at least some of its market share that it has lost to the smartphone behemoths Apple and Samsung in the last few years.
Home Depot, the world’s biggest home improvement retailer and fifth biggest overall retailer, based on its Q3 report of 2012, operates 2,252 retail stores across the US, Canada, China and Mexico. The company’s executives, corporate employees and managers, about 10,000 in number, will see their BlackBerry devices replaced with Apple iPhones in the next few weeks. However, these are not the mobile devices that are used in stores. The 60,000 store employees use Motorola smartphones which act as mobile points-of-sales, walkie-talkies, analytical and telephony devices.
The replacement of BlackBerry devices sent the shares to $15.86 and also overshadowed the news of the launch of Z10 devices. However, the devices have taken the United Arab Emirates market by storm, and have also done well in Britain and Canada, at least in terms of reviews. However, United States, one of the two markets for Blackberry that matters (the other being, strangely enough, Indonesia), will have to wait for another month for the phone to arrive.
The Z10 compares well to a modern flagship phone by the other manufacturers, with a 4.2”, 356 ppi screen running a 1.5 GHz Qualcomm Snapdragon SoC with 2 Gb of system memory. The phone has a standard 8 megapixel camera with software image stabilization and 16GB with an SD card slot and a removable battery. All in all, BlackBerry did not embarrass themselves with this device.
The phone has seen a major upgrade over any version of the BlackBerry, whereby the users can now make use of ‘Active Frames.’ The interface is nothing revolutionary or even evolutionary like Microsoft’s (NASDAQ:MSFT) Windows Phone’s Live Tiles, and really very similar to that of the iPhone and Google’s (NASDAQ:GOOG) Android. However, the traditional BlackBerry Hub stays intact for all emails, text messages, social media updates etc.
The apps on the phone can be separated for both professional and personal use. This can be achieved by swiping down and pressing buttons called “Personal” or “Work.” But app integration is poor and the list of usable apps makes the selection for Windows Phone look boundless. And that will ultimately be the undoing of BlackBerry’s come back plans.
Windows Phone has the advantage of the unified code base to Windows 8 to draw upon and an SDK that is one of the easiest to code for. BlackBerry, like Microsoft, has to pay developers to get the ball rolling but as bad as Microsoft’s situation is from a growth perspective, the company is still a cash generating machine for the near future, unlike BlackBerry.
That said, the Z10 does give BlackBerry a chance to hold lost market share in the past 2 years while it calms down the market. It has more than 2,700 unique businesses in North America registered for the BB10 program which is encouraging.
The emerging markets, particularly Indonesia and China, will play a crucial role in determining BlackBerry’s future. However, the new Z10 device is still high-end for some of these markets and BlackBerry may have to launch cheaper handsets for these countries. The trend across emerging markets is towards the commodity end of the market. Premium phones are not being sold in huge numbers at premium prices.
A new Z10 in India could cost around $750, more expensive than as iPhone-5, a market Apple isn’t willing to enter because of the margins it would have to accept. Although BlackBerry doesn’t reveal country specific data but research firm IDC believes that Indonesia is BlackBerry’s third largest market, behind the U.S and U.K., in terms of the biggest sales markets, while India follows in at number nine. Indonesia is perhaps the only country where a Blackberry launch can attract crowds of thousands.
According to ABI research BlackBerry accounted for almost 50% of Indonesia’s smartphone shipments in 2012. This is an impressive number when compared to BlackBerry’s global share of mere 5.3%. In India, BlackBerry ranked third after Samsung and Nokia (NYSE:NOK). But it will have to develop a lower-cost model to compete there with the incoming Lumia 620, an entry-level phone so good it is making a strong argument for re-defining the term flagship.
Nonetheless, the news of Home Depot breaking up with BlackBerry for Apple shows an alarming trend and follows in the footsteps of other institutional customers; such as the U.S. Immigrations and Customs Enforcement agency which has 17,600 phones, the National Transportation Safety Board and more, recently, the Australia’s Treasury Department all went iPhone despite the highly anticipated launch of the new BlackBerry.
The launch has created a great short-covering rally but not much more. It will take a new month’s of sales figures to convince me that this isn’t BlackBerry’s last hurrah. Without a value phone strategy and a truly distinguishing feature set to justify the price I just don’t see the future here.
