Can BlackBerry Ltd. Win Back a Tiny Corner of the World From Google?

BlackBerry Ltd. is launching a low-cost smartphone in Indonesia, but even a successful launch won't move the needle much.

May 14, 2014 at 1:05PM

Across the world, Blackberry Ltd (NASDAQ:BBRY) has seen its smartphone market share eviscerated in the last three to four years. In the U.S., Apple (NASDAQ: AAPL) has been the primary beneficiary of BlackBerry's slow response to the touchscreen revolution. However, in most of the world, Google's (NASDAQ:GOOG) (NASDAQ:GOOGL) Android ecosystem has been the big winner.

Google's march toward mobile dominance has not occurred simultaneously across the whole world. In fact, in some countries -- most notably Indonesia -- BlackBerry only recently fell from grace. Thus, it's not surprising that BlackBerry is turning to Indonesia in its most recent attempt at a comeback in the smartphone market.

G

BlackBerry is launching a new low-cost smartphone in Indonesia. Source: BlackBerrry.

This week, BlackBerry launched the Z3, Jakarta Edition smartphone, which is exclusive to Indonesia for now. However, it's highly unlikely that this new phone is going to drive any broader renaissance of BlackBerry's handset business. BlackBerry's enterprise security offerings and the QNX embedded OS represent the real turnaround opportunity.

BlackBerry's fall
There are numerous reasons why BlackBerry's phones have lost their popularity. In emerging markets, one of the key causes of BlackBerry's downfall was the emergence of cheap phones running Google's Android OS.

Since Google gives Android to smartphone OEMs for free, there has been a "race to the bottom" in terms of profit margins on entry-level phones. (As a result, most smartphone manufacturers are barely profitable, if at all.) BlackBerry has needed to invest in software as well as hardware, meaning that its low-priced devices have had inferior specs compared to cheap Android phones.

Indonesia was one of BlackBerry's last bastions of strength. As recently as 2011, BlackBerry held 43% of the smartphone market there, according to The Wall Street Journal. However, by last year, its market share had plummeted to just 13%. As in other emerging markets, Google's Android OS is now dominant, with 81% of the smartphone market.

A new smartphone strategy
In December, BlackBerry announced that it had struck a five-year partnership agreement with contract manufacturer Foxconn. Under the arrangement, BlackBerry and Foxconn would jointly design entry-level smartphones, and Foxconn would manage the inventory, dramatically reducing BlackBerry's risk.

The new Z3 is the first product of this collaboration, and it definitely attacks the "entry-level" segment that Google currently dominates. The Z3's retail price in Indonesia is approximately $191. Despite the low price, the Z3 has a five-inch touchscreen and a five megapixel camera, unlike previous entry-level BlackBerry phones.

Later this year, BlackBerry plans to expand the rollout of the Z3 to other developing markets, especially in Southeast Asia. The company hopes to sell millions of Z3 phones. That would be a small victory in itself, considering that end users purchased just 3.4 million BlackBerry phones last quarter.

This is just a sideshow
If the new Z3 phone posts a good sales performance, it will be a nice PR win for BlackBerry, but little more than that. Based on its $191 price tag, the Z3 is likely to produce very little gross profit, which in turn will have to be shared with Foxconn.

BlackBerry may be able to make some money later by selling apps or selling "stickers" for its BBM messaging service. However, BlackBerry doesn't have nearly the same capabilities as Google for monetizing device usage.

For BlackBerry to return to profitability, it will either need to regain ground in the high-end smartphone market -- which is a tall order indeed -- or it will need to succeed in some of its initiatives beyond smartphones. BlackBerry may win back a few customers in Indonesia with the Z3, but by and large, the smartphone market has moved on. BlackBerry should move on, too.

Are you ready to profit from this $14.4 trillion revolution?
Let's face it: Every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer Amazon.com in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.

Adam Levine-Weinberg owns shares of Apple and BlackBerry and is long January 2016 $560 calls on Apple. The Motley Fool recommends and owns shares of Apple and Google (A and C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers