Yesterday, beleaguered smartphone developer BlackBerry Ltd. (BBRY) faced a major hit which hurts it the most. Recently announced business deal between Apple Inc. (AAPL) and International Business Machines Corp. (IBM) related to enterprise mobility solutions may spells doom for BlackBerry’s much awaited turnaround.
Consequently, the stock price of the company plummeted nearly 12% yesterday. In contrast, the company’s shares had gained an impressive growth of almost 50% year-to-date, before the Apple-IBM deal announcement.
BlackBerry smartphone, once a leader in the global smartphone market was persistently losing its position since 2008. The introduction of Apple’s legendary iPhone and iPad and growing adoption of Google Inc. (GOOG) developed Android operating systems by several smartphone and tablet makers pushed BlackBerry into a corner.
The company introduced its next-generation BlackBerry 10 operating system-based devices, which failed to achieve any meaningful market traction.
Nevertheless, BlackBerry’s core business area was the enterprise mobility segment where it still retains its position due to its industry leading strong security/email features. Moreover, profit margin is very high for this business and generally loyal customers are added advantage.
The turnaround strategy of the company revolved around its enterprise service business including BBM instant messaging service coupled with cost cutting and sale of underutilized properties.
Meanwhile, the signing of a business agreement between former arch rivals, Apple and IBM, under which IBM will develop over 100 applications related to analytics, Big Data, mobile device management and security software, primarily for enterprise users of Apple’s iPhone and iPad has jeopardized BlackBerry’s turnaround plans.
Apple’s mobile devices are gaining rapid traction in the enterprise segment and an innovative product from the Apple-IBM entity is likely to be an instant hit among companies which support Bring your Own Device (BYOD) trend.
Furthermore, the integration of IBM’s state-of-the-art advanced analytics systems into Apple’s mobile devices may become a game changer, enabling the corporate sector to significantly enhance efficiency and productivity of their employees which will help them to maximize profit. Additionally, the joint venture will provide secured means for executing business transactions.
We remain skeptical about the long-term prospects of BlackBerry. The company has extensively tried to revive its lost glory in the smartphone business for general users but failed measurably. Its last hope for the enterprise smartphone business seems dwindling due to the recent Apple-IBM venture.
In addition, growing competitive pressure from cloud-based application software developers, such as VMware and Citrix Systems are other headwinds. We believe that only an innovative product offering from BlackBerry might help it to counter such stiff competition. BlackBerry currently carries a Zacks Rank #2 (Buy).
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