BlackBerry's Turnaround Is Progressing, Slowly

BlackBerry  (NASDAQ: BBRY  ) is like the Rodney Dangerfield of mobile, it just doesn't get any respect. Looking closely, though, the company continues to make small steps forward in its attempt to turn its fortunes around. Shares of BlackBerry increased 9%, spurred by comments from John Chen at the Re/code Code Conference, before quickly giving up those gains. The cost-cutting process has been started, which is the ante for BlackBerry to get into the turnaround game and begin to compete against current industry giants Apple (NASDAQ: AAPL  ) and Samsung (NASDAQOTH: SSNLF  ) . What can BlackBerry do to stabilize its shrinking user base and find new sources of revenue?

BlackBerry Live, part two
In April, BlackBerry took to the road to discuss its renewed vision in enterprise mobility and solutions for business customers. This was an attempt to bring marketing to customers after the company canceled its BlackBerry Live conference in December. This was necessary to communicate the strategy of a new CEO with a new vision.

Hints of improved results
John Chen offered a more positive outlook at the Re/code conference, making a bold statement that BlackBerry would be cash-flow-positive by the end of this fiscal year. This caused a 9% jump in the share price, before retrenching. The plan is to focus on the company's core base in corporate environments and superior security architecture. Bold statements by CEOs are not always founded, but definitely reflect an improvement in sentiment.

Closing the app gap
In January, an update to version 10.2.1 of BlackBerry's OS allowed .APK files to be installed directly on devices without the need to convert them to .BAR format. Seamless android app installation is a big step toward closing the gap between application platforms, but there are still glitches. Many apps appear to run better on some handsets than others. As TechCrunch's Steve O'Hear wrote, the Q10's screen size detracts from the experience of running Android apps by cropping UI elements. Today, it seems that the upgrade path for BlackBerry loyalists who want access to Android apps requires the Z10, which has a screen comparable to iPhone and Android handsets.

Vertically targeted handsets
A casual mention at the re/code conference may provide the answer to how BlackBerry can separate itself from the pack. During the presentation, Chen mentioned that the company is working on vertical-specific handsets targeted at industries such as medical. If it can offer business-specific functionality that people cant get from Android apps, perhaps the company can rejuvenate interest in its installed base.

Price could be a differentiator
The price point of the recently launched Jakarta is only $199, which is considerably less than prior BlackBerry handsets, as well as competitors like the iPhone or Galaxy lineup. By outsourcing the manufacturing to Foxconn, BlackBerry was able to dramatically reduce handset prices to a level cheap enough to be appealing in emerging markets. If BlackBerry can offer a low-cost handset with superior security in the U.S., perhaps it could begin rebuilding its installed base in cash-strapped government agencies and cost-sensitive industries.  

Carriers may embrace a low-cost option as premium prices rise
Carriers have been paying the high cost of premium handsets, then passing it through to customers over the life of the standard two-year contract. However as costs to the carriers rise for the iPhone 6 and Galaxy series, cheaper handsets would represent a greater bargain. Apple is reportedly negotiating a $100 price increase, according to Jeffries analyst Peter Misek. Samsung appears to be offering the new S5 at a premium price point as well, which could be as high as $1,000, according to an industry blog. The price increases are unconfirmed at this point, but Apple and Samsung have control over a large percentage of the handsets being sold, making this a logical time to renegotiate with carriers.

Whether BlackBerry can find differentiation in price or vertically targeted handsets, it is closing the gap in application breadth by embracing Android. If the company can jump-start revenue growth by finding a niche with one of these two strategies, it could begin to generate profit growth on its reduced expense base.

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Read/Post Comments (4) | Recommend This Article (2)

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 June 10, 2014, at 9:16 PM, terrydabear wrote: $7-$8 bucks a share, this may be the best wild-hair out there in mobile comm........someone convince me I'm wrong......

  • Report this Comment On June 10, 2014, at 9:23 PM, melegross wrote:

    Too many ifs here.this has been the recent Blackberry history. We get if this and if that, but nothing definitive.

    The stock price has risen on a column of hot air, but the fuel for it is running out.

    So far, Chen has do e nothing that has increased sales or cut losses. Blackberry is drastically eating into its cash and investments. They now have debt almost equal to the cash and investments. If they keep digging to that safety net, it will soon be gone.

  • Report this Comment On June 10, 2014, at 9:29 PM, melegross wrote:

    You're wrong. It's terribly overvalued. All we've got so far is a lot of talk. Nothing that Chen has done up to now has prevented the free fall in sales, or the ever increasing losses.

    He continues to cut expenses, which might make things look good for the short term, but makes it more difficult to do proper R&D and product development in the future.

    If any of his ideas come to pass, I might think differently about it, but they just look like wishful thinking now, despite what Blackberry fans say.

  • Report this Comment On June 11, 2014, at 5:48 PM, k1moops wrote:

    Somehow it appears that there are certain people who believe there's a Steve Jobs running BlackBerry

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David Eller

I started contributing to the Motley Fool in 2013. I have held research positions at two investment banks and two hedge funds before trying more entrepreneurial ventures. I'm passionate about helping people find freedom in financial independence. Feel free to add comments and start a discussion. I hope to use these articles as forums to learn from you as well as share my opinion.

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