Can BlackBerry Convert the Masses?

BlackBerry still has a loyal following, but the company needs new converts if it wants to survive.

Mar 1, 2014 at 2:45PM

In boardrooms, political meetings, and corporate break rooms across the world a small, but loyal, group of users still pull BlackBerry (NASDAQ:BBRY) devices from their pockets and tap out messages to each other. But for the rest of the world, consumers have moved on to Google's Android, Apple's iOS, and even Microsoft's Windows Phone OS, and they aren't looking back.

This means BlackBerry needs to do more than just sell smartphones, it needs to make new converts.

Blackberry Device
Source: BlackBerry.

Go forth and multiply
BlackBerry's loyal base recently showed its face when T-Mobile ran a promotion offering smartphone credit to BlackBerry users if they upgraded to a new iPhone. BlackBerry loyalists took to Twitter and called out T-Mobile CEO John Legre on the promotion. After throwing a few punches against BlackBerry himself, T-Mobile offered a few promotions for BlackBerry devices.

But despite their loyalty, BlackBerry users are vastly in the minority. To try to grow this base, BlackBerry just announced two new mid-range devices, the Z3 and the Q20. The Q20 has physical buttons for calling and navigation, as well as a trackpad. It's a throwback to some of BlackBerry's popular devices, but with the new BB10 operating system. BlackBerry CEO John Chen recently told CNET that some of the email and cut-and-paste functionality of the Q20 is reminiscent of old-school BlackBerry as well.

Part of this back-to-basics approach comes from BlackBerry loyalists questioning the merits of BB10 OS.

Disenchanted disciples
BlackBerry's problem in keeping existing users and wooing new ones lies in the company's BB10 operating system. If you're looking for proof, consider that this past quarter BlackBerry sold just 1.1 million BB10 devices.


BlackBerry's failed savior, the Z10. Source: BlackBerry.

That's a terrible number to begin with, but it's especially bad when investors consider that BB10 was supposed to help turn BlackBerry around. The poor response to the OS can easily be compared to Microsoft's Windows 8 launch.

In an attempt to meld a touchscreen interface with a PC OS, Microsoft created one of the most difficult operating systems to date. Its negative impact on the PC market has been huge. Shipments of PCs significantly declined in the same quarter Windows 8 launched, leading IDC to say that, "at this point, unfortunately, it seems clear that the Windows 8 launch not only failed to provide a positive boost to the PC market, but appears to have slowed the market." 

To help lure back users, Microsoft brought back a version of its famous Start button, and has made other navigation changes to the OS, with more on the way. That seems strangely familiar with BlackBerry's new Q20 device that seems to be an attempt to give old-school BlackBerry users something familiar to identify with. But with a cold reception to BB10 already in full swing, it seems highly unlikely a few buttons on a new device will entice former users back to the company, or attract new ones.

Foolish thoughts
To bring new users into the fold, Chen thinks the company will need to educate people on why BlackBerry is the best operating system for them, and make it easy for customers to use it right out of the box. He's also mentioned that a new flagship device will launch later this year.

But we've unfortunately heard this story before. The Z10 was supposed to bring BlackBerry back into the mobile game, but it has clearly failed to do so. This time around, BlackBerry seems to be taking a different approach, with Chen telling Bloomberg Television that the company's future devices will "predominantly" have keyboards over touchscreens.

It appears that BlackBerry is stuck between struggling to gain new customers without alienating its existing user base. Trying to please both groups isn't a winning strategy. I don't see how a new flagship device, whose defining feature is a keyboard, is going to bring new users to BlackBerry. At the same time, BB10 has had more than enough time to show what it has to offer, and consumers are unenthused. Sure there's a still loyal following of BlackBerry users right now, but they're failing to make many converts. 

Editor's Note: The original article referenced the Z30 as a new phone. That was incorrect, it was the Z3. The Motley Fool apologizes for the error.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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