Hanging Up on BlackBerry

Instead of concentrating on the enterprise services sector to the exclusion of all else, the newly appointed CEO of BlackBerry (NASDAQ: BBRY  )  says the smartphone maker has no intention of giving up sales of its namesake phones. Maybe he should rethink that.

A new market share survey from comScore shows Apple  (NASDAQ: AAPL  )  remains the dominant OEM leader in terms of U.S. subscribers with a better than 40% share of the market, well ahead of Samsung's 25% take. HTC, Motorola, and LG follow respectively, but all have single-digit share. BlackBerry no longer ranks among the top five OEMs.

When we look at the platforms of these companies, we see BlackBerry is becoming almost irrelevant as well. Where Android owns over half the market and together with Apple's iOS they command more than 90% of U.S. subscribers, BlackBerry's share has dwindled away to just 3.8%, down from 4.4% in June. While some hay can be made that it's still beating Windows Phone at the moment despite the latter's head start in the marketplace, it's clear that whatever BlackBerry's future is (and that's not very clear at all), it's not in smartphones.. 

It's only a matter of time before BlackBerry succumbs, though who would've guessed there are some people still using Nokia's Symbian OS? 

I've always been skeptical that Prem Watsa would follow through on his bid to take the smartphone maker private via Fairfax Financial (NASDAQOTH: FRFHF  ) , believing that due diligence would cause him to back out of the plan. When BlackBerry announced on Monday the proposal was over and it wasn't looking for buyers anymore, it wasn't exactly vindication though. Watsa wasn't completely scared by what he saw (though others who might have helped him take it private apparently were), as he's gathering $1 billion in convertible debentures to invest in BlackBerry, with Fairfax fronting up to $250 million in convertible unsecured debt and other investors kicking in the remaining $750 million.

With BlackBerry ousting CEO Thorsten Heins in favor of Watsa's hand-picked successor John Chen (and Watsa installing himself as lead director), there's a big attempt to make a real go of it as a viable company. But there are big doubts, too.

Had BlackBerry's leadership also decided the smartphone was a losing battle and it would be better to concentrate instead on the enterprise security market, I might have had more confidence in the overall direction the company was heading. The appointment of the tech-savvy Chen by all accounts is a smart one, and his statements on reviving the enterprise brand are encouraging.

But the comScore survey shows that BlackBerry is fading away, and other surveys put it in an even worse light. Strategy Analytics says the BB OS has fallen all the way down to just a 1% share of the market, from more than 4% a year ago, while the Windows Phone surged to a 4.4% share. Android, of course, dominates at more than 80%.

All of which means BlackBerry's decision to continue selling smartphones into a market that no longer wants them will serve as a distraction for management. Far better to lop off the gangrenous limb so the rest of the company can survive.

It still seems to me Watsa suffers from a bit of investment bias because he's dumped so much money into BlackBerry. As successful as he's been, in a number of his investments he's also had some spectacular failures. From property and casualty insurer TIG Holdings and Xerox's Crum & Forster division, to Canadian publishers Torstar and CanWest, there have been several big flameouts over the years. I happen to think BlackBerry will be another one of them.

Fairfax Financial may have deftly avoided hedge fund manager Jim Chanos' prediction that it was going to go bankrupt, but that doesn't mean Watsa will hit pay dirt with BlackBerry. There's a disconnect here and even if Watsa won't, investors might want to consider hanging up on their investment in the smartphone maker.

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Read/Post Comments (5) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 09, 2013, at 3:55 PM, BR14 wrote:

    I doubn't Obama or Chancellor Merkel of Germany would be too happy if BlackBerry stopped making phones.

    You'd make a lousy doctor.

    The patient has a bad case of influenza and you're calling the undertaker.

  • Report this Comment On November 09, 2013, at 4:12 PM, cbglobal wrote:

    You Fools keep promising to hang up on Blackberry, but keep on posting trash day after day; week after week; year after year.

    For once, show some credibility and hang up and never post about the company again.

    Since I live near Alexandria, I think I will start stopping by your offices and asking Tom and Dave Gardner (the founders) why not. I will bring a Washington Post reporter friend with me.

  • Report this Comment On November 10, 2013, at 3:50 AM, luc90fg8901 wrote:

    The article is mostly based on personal opinions, not facts. Unfortunately yahoo decided to have fool.com content on their website. It's time to stop reading this crap.

  • Report this Comment On November 10, 2013, at 12:48 PM, TimKnows wrote:

    Sad really, thank goodness no one believes any of these articles. While I believe in having a site to vent your personal views, it shouldn't go un-noticed; the many errors in this article. Perhaps the reason BBRY wasn't sold for cheap was something to do with all of the companies that showed up to purchase assets. BB decided not to break up the company, the success of BBM cross platform might have been the final reason to go it alone again. Study, research and come back with a better effort. Thanks.

  • Report this Comment On November 10, 2013, at 6:18 PM, margiecfl wrote:

    LOL, all you idiots who complain about fool.com posting peoples' opinions that don't jive, also allow yours.

    Blackberry is nearly dead because they failed to recognize emerging trends and customer desires after being the industry leader.

    Sianora Blackberry. Good luck idiots.

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