If you were surprised by this week’s “stunning” news that once king-of-the-hill smartphone vendor BlackBerry (BRRY) and its shares took another leg down, I have to say you should be reading my investment newsletter PowerTrend Profits. In addition to firing Chief Executive Officer (CEO) Thorsten Heins, BlackBerry also opted for a $1 billion fundraising plan from its largest shareholder rather than $4.7 billion rescue bid.
The way the media is reporting it, it was BlackBerry that opted for the change in terms, but I am more inclined to think it was Fairfax Financial, the company’ s largest shareholder, that altered the terms of the deal.
Here’s why I think that…
Dramatic share loss and big operating losses scare away investors. During the last four years, which were marked by significant market share gains from both Apple (AAPL) and Samsung in the smartphone market, BlackBerry’s share price has fallen from 50% to 3% of the market. Other than those two now-market-share-leading companies, a number of others have attempted to make hay in the smartphone category — LG Electronics, HTC, Motorola Mobility, Sony (SNE), Google (GOOG), Nokia and more. To make matters worse, we’re also seeing several Chinese manufacturers throw their hats into the ring — Huawei, Lenovo and ZTE. The bad news for BlackBerry and others is that these Chinese smartphone manufacturers are gaining market share. According to 3Q 2012 data collected by IDC, behind market share leaders Samsung and Apple were Huawei, Lenovo and LG Electronics.
Robust mobile operating systems from Apple, Google and even Microsoft offer far greater functionality, more apps and many of the features that first led companies and consumers to adopt the BlackBerry. In my view, the writing was on the wall for BlackBerry when federal and other government institutions started allowing iPhones and other smartphone models to be used in place of BlackBerry ones.
So much like when you do your homework on a company and its shares and you’re less than impressed by what you found out, why would Fairfax Financial put up $4.7 billion of its investors’ money to try and save a company that is losing market share, generating losses and whose recent products have been a disappointment? Plus, BlackBerry lacks a roadmap to take the company into The Connected Car and The Connected Home.
You wouldn’t buy shares in that company, and it comes as little to no surprise that Fairfax Financial wouldn’t do so either.
A takeout seems unlikely as well for BlackBerry. Some professional investors have asked for my view on whether or not BlackBerry is a takeout candidate. My resounding response is “NO.” There is ample hardware manufacturing capacity in Asia, which means next to no one would want BlackBerry’s hardware operation. When it comes to BlackBerry’s BB10 operating system, its install base is waning. As a platform, its app count trails significantly behind those of Apple, Google and Microsoft.
The one jewel to be had in BlackBerry’s portfolio is its security business, but even with that, solutions from other companies — Apple, Samsung, Good Technology and others — are making significant strides. Maybe BlackBerry could sell that part of its business, but that still leaves it holding the money-losing hardware business.
It’s a bloodbath — just like I expected. Subscribers to PowerTrend Profits have heard me dish on what I call The Smartphone Bloodbath for some time now, and it is unfolding almost exactly as I predicted. That’s why I advised my subscribers to “buy the bullets, not the guns” of the smartphone market, and that has us well in the black.
PowerTalk: Behind the B2B and B2C Communication Revolution with Twilio
Joining me on PowerTalk is Jeff Lawson, CEO and co-founder of Twilio, a company that makes cloud-based telephony tools — voice and messaging — for companies and mobile application developers like Uber, Google (GOOG), Hulu, salesforce.com (CRM), Home Depot (HD), AT&T (T) and others.
With the global explosion of the Internet, smartphones and tablets, we’ve seen a shift in how we can communicate with one another. This includes: instant messaging, mobile messaging, picture messaging, email, messaging through Facebook, Google+, chatting and more recently video calls through Skype, Google and even Apple with its FaceTime app.
While many think these new modes of communication are for personal use — keeping in touch with family, friends and so on — there’s another aspect to them — they can be used for business. That’s right: the Internet and telecommunications technologies are changing the way we connect with companies. That situation has implications for how a company communicates with its customers. It’s not just Twitter and Facebook — a company can interact with customers via voice, messaging or even picture messaging.
In the age of software-defined communication, which is having an impact on the business models of Comcast (CMCSA), AT&T, Verizon (VZ), Cisco (CSCO), Avaya and others, Jeff has been named one of the top VoIP CEOs. To me, that says he’s worth listening to, and as you listen to this edition of PowerTalk, you’ll soon see picking up the phone and talking to someone in a new light.
Read my PowerTrend Brief from last week, If You’re Not Investing, Here’s Why You Need to Pay Yourself First. I also invite you to comment in the space below.