BlackBerry’s Project Ion May Be Its Swan Song for the Smartphone Market

Although BlackBerry may make a comeback in the future, 2014 is not the year for it.

Jun 9, 2014 at 12:30PM

Waterloo, Ontario-based mobile developer BlackBerry (NASDAQ:BBRY) has suffered in recent years as it went from the darling of business communications to a company desperate to define itself within the smartphone segment, having conceded market share to Apple's iPhone, Google's (NASDAQ:GOOG) (NASDAQ:GOOGL) Android, and to a lesser extent Microsoft's (NASDAQ:MSFT) Windows Phone devices.

Bleak financial results
BlackBerry's most recent results saw revenue drop 18% from $1.2 billion in Q4 2013 to $976 million in Q1 2014. The company's financial results paint a dire picture, with $2.7 billion in revenue recorded in Q1 2013 -- an astonishing 64% drop. Net loss for the first quarter of 2014 was $432 million, up from net income of $98 million at the same time in 2013. For the year ending in Q1 2014, BlackBerry reported over $5.8 billion in losses, up from a $646 million loss in Q1 2013.

One of the few saving graces on the company's balance sheet is its cash and investments balance of $2.7 billion, as of the end of Q1 2014, of which cash accounted for $1.58 billion, up from $1.55 billion in Q1 2013. Although BlackBerry is currently hemorrhaging market share, it still has a fair spring in its step, as its cash assets are vital to a turnaround, allowing it to fund new projects.

Android and Apple sideline BlackBerry in consumer segment
According to recent data from market intelligence firm IDC's report, Worldwide Quarterly Mobile Phone Tracker, Google's Android system currently holds 80.2% of the consumer smartphone market, while Apple holds 14.8%. Both companies, however, are dropping market share to Microsoft's Windows Phone, forecast to grow from its current 3.5% to 6.4% by 2018. Microsoft is the only platform currently gaining market share, although at a very slow pace. It will require the tech giant to innovate to convince customers to make the jump from iOS and Android to Microsoft's relatively niche platform.

BlackBerry holds a mere 0.8%, with a prediction it will drop to just 0.3% by 2018. The numbers imply BlackBerry's days as a leader in the consumer phone market are numbered. Although BlackBerry will still compete within the segment, the company is refocusing its efforts on the enterprise, rather than the consumer, market, where it is currently unable to offer anything competitors cannot. The company's latest project announcement is a prime example of this.

The trick up BlackBerry's sleeve
Last week, BlackBerry announced a new initiative -- the ominous-sounding Project Ion -- that it hopes will capitalize on the emerging Internet of Things, or IoT. Project Ion aims to help companies accumulate and process data from a variety of everyday sources such as fridges, lights, cars, phones, televisions -- basically any electronics you can find at home or in a business -- and then use this data to give companies functional insight.

In continuation of the company's past penchant for focusing on business and enterprise, it will use its strength in business communications and information to create a platform for IoT data, something that hasn't yet been achieved in scale by other firms.

With its strong foothold in the business market, Project Ion could be something of a game-changer for BlackBerry. It won't make the firm any stronger in the competition against Apple, Microsoft, and Google in the consumer phone market, but it may mean the company can tap into and take control of the entire, and currently unrealized, enterprise IoT market.

However, with most electronic devices not currently communicating, let alone speaking the same digital languages as each other, it could take years for BlackBerry to see gains. Think of the entire infrastructure, business and consumer electronics, vehicles, and so much more that would need to be replaced or brought up to date for BlackBerry to make use of their data.

The company is also likely to be fending off stiff competition from Google, which is also exploring the possibilities of the IoT. Google's high-profile purchase of Nest for $3.2 billion earlier this year moved the company into consumer energy efficiency and the IoT. With the right acquisitions and R&D, Google could easily shift into the business market, putting that data to work in a manner similar to Project Ion.

Market reaction to Project Ion was low-key, with BlackBerry going from $7.24 to $7.31. The company saw better gains this week after CEO John Chen stated that he believes the company has an 80% chance of a turnaround; up from his previous prediction of 50%; BlackBerry's price went to $7.74 on the news.

The bottom line
For now, BlackBerry is sitting near $7.60 per share. It's going to be some time before the company is party to any real gains, but at least its price drop seems to have bottomed out. Although BlackBerry may make a comeback in the future, 2014 is not the year for it. Project Ion will take a long time to implement, and even then, Google may well take the lion's share of the market. It's a hold.

The Internet of Things will be a $14.4 trillion revolution
Have you ever dreamed of traveling back in time and telling your younger self to invest in Apple? Or to load up on Amazon.com at its IPO, and then just keep holding? We haven't mastered time travel, but there is a way to get out ahead of the next big thing. The secret is to find a small-cap "pure-play" and then watch as the industry -- and your company -- enjoy those same explosive returns. Our team of equity analysts has identified one stock that's ready for stunning profits with the growth of a $14.4 TRILLION industry. You can't travel back in time, but you can set up your future. Click here for the whole story in our eye-opening report.

Haris Qureshi has no position in any stocks mentioned. The Motley Fool recommends Google (C shares). The Motley Fool owns shares of Google (C shares) and Microsoft. 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