Z10's failure to launch consigns BlackBerry to a niche future—maybe minus phones.
We knew things were hard for BlackBerry and that this was going to be a harsh year for the company that practically invented the "smartphone" business. But the cold shoulder that BlackBerry's new handsets have received—and its Z10 touchscreen phone in particular—now comes with a price tag that seems to seal the company's fate.
That price tag, called the "Z10 Inventory Charge," is $934 million—the vast majority of the approximately $1 billion in losses that the company reported in an SEC filing yesterday. The bad news may complicate the $4.7 billion bid made for the company by Canadian private equity firm Fairfax Holdings, which is pending based on a look at BlackBerry's books. And with phone sales off by nearly a billion dollars from the same period last year, it's possible that the flop of the Z10 will lead to BlackBerry's exit from the cell phone business.
The company has already said that it plans to move away from the consumer market entirely, focusing on the "enterprise and prosumer market" and "end-to-end solutions." Given that the software business—and BlackBerry Enterprise Service 10 in particular—is about the only thing bringing in a positive cash flow at BlackBerry, that may be the company's only choice going forward if the go-private deal collapses.
We've written off BlackBerry before. But given the company's precarious position as it prepares for a sale, it's increasingly doubtful BlackBerry will emerge from this year in a form that even vaguely resembles the company that changed its name from Research In Motion at the beginning of this year. As if to prove how hard off BlackBerry is, a rumor that Cerberus Capital Management (the same "distressed asset" investment firm that oversaw the death spiral of Chrysler after it was cut loose from Daimler-Benz) was interested in looking at BlackBerry's books today caused BlackBerry's stock price to spike upward, though far short of the $9 a share Fairfax has offered.
 |
A glut of Z10 phones cost BlackBerry nearly $1 billion. Now, it prepares to sell itself.
Casey Johnston
|
Withering on the bush
For those who have been fans of the BlackBerry—and I count myself among them, despite some of the pessimistic things I've said about the company—the Z10's failure to gain traction is just another in a series of unfortunate product launches that date back to the late jump into the tablet market with the PlayBook. But the Z10 launch makes the PlayBook failure pale in comparison, if only because so much of the company's future was bet on the BlackBerry 10 launch.
That bet included shipping mass quantities of its new BlackBerry 10 handsets to phone carriers and retailers in hope that the long-promised launch would bring BlackBerry's faithful customers running in for an upgrade. But as the company admitted in its SEC filing yesterday, once the phones were on the market for a few months, "the sell-through levels for BlackBerry 10 smartphones decreased…due to the maturing smartphone market and very intense competition."
Of course, if you're in the market for a cheap touchscreen handset, the Z10 flop may be your gain. BlackBerry is planning on "re-targeting" the Z10 as an entry-level handset for a "broader" set of customers. In other words, the company will be selling $934-million-worth of the phones at fire-sale prices.
BlackBerry actually blames itself for some of the harsher-than-expected competition, claiming delays in release of features for BlackBerry Enterprise Service 10 kept business customers from committing to the new phones early. BES 10, the company's enterprise security and management platform, didn't ship until just before the release of the Z10. BlackBerry's analysis seems to be that while enterprise customers (that the company could have counted on in the past to scoop up boatloads of new handsets) were waiting, many of them got impatient and jumped ship to Android or Apple or just sat on their hands and waited for things to play out.
But BlackBerry also had moved to make BES 10 compatible with Android and iOS phones in an effort to shore up the software business against an onslaught of other mobile device management platforms. That may have actually added to the Z10's woes, as organizations decided to take advantage of that new functionality with someone else's phones.
The incredible shrinking business model
As it turns out, BES 10 is one of the few bright spots in BlackBerry's overall business. If anything, BlackBerry's software has kept the company's hardware business from being totally annihilated up until now. The move to make BES and the BBM messaging platform open to other phone platforms may make them a viable, but much smaller, business unto themselves—which is why BlackBerry has moved to make BBM an independent subsidiary. But without the differentiation provided by BES and BBM, the only thing that BlackBerry has left to hang hopes for a handset business on is the "end-to-end solutions" pitch. And there's someone much bigger with more cash that is moving into that business with them: Microsoft.
Microsoft's move to acquire Nokia's phone business isn't just part of a move to become a consumer products company. The deal also puts Microsoft in a position to offer end-to-end management from server to desktop to tablet to handset through its System Center tools. And it gives the company the ability to offer mobile hardware optimized to work in the Microsoft enterprise ecosystem without having to invest in another management platform.
That's bad news for BlackBerry. Most of BlackBerry's customers already have licenses for Microsoft management tools; if Microsoft can do 80 percent of what BES and BlackBerry 10 can do for enterprise customers in terms of mobile device management and security, that will be incentive enough for them to move away from BES and the BlackBerry platform entirely and consider Windows Phone instead of BlackBerry 10.
In other words, Microsoft is hoping to leverage the same economics that it used to take over corporate networks, dislodging Novell. And BlackBerry is looking a lot like the Novell of mobile—a distressed platform that niche customers cling to because of that one feature they need to fulfill a very specific business mandate. That may be a recipe for survival as a private company, but it isn't exactly a path to recovery.
Courtesy: arstechnica
0 comments:
Post a Comment