BlackBerry's (BB 1.80%) stock closed at its all-time high of $147.55 on June 19, 2008. Back then, the Canadian tech company was still known as Research in Motion, and its BlackBerry handsets controlled about 40% of the U.S. smartphone market and 20% of the global smartphone market.
But 15 years later, BlackBerry no longer produces smartphones. It lost that market to Apple (AAPL -0.35%) and Alphabet's (GOOG 9.96%) (GOOGL 10.22%) Google, which rendered its keyboard devices obsolete with a new generation of touchscreen phones. Instead, it's now a company that generates most of its revenue from cybersecurity software, Internet of Things (IoT) software, and patent licensing fees.
Image source: Getty Images.
That bold shift, which was led by Chief Executive Officer John Chen over the past 10 years, brought BlackBerry back from the brink. However, BlackBerry has a share price of about $5 today, so a $10,000 investment at its record high 15 years ago would have withered to about $340. Let's see why BlackBerry's stock crashed -- and whether it will ever rise back to triple-digit levels again.
How BlackBerry lost the mobile market
BlackBerry lost the mobile market to Apple and Google for three simple reasons. First, it initially underestimated the appeal of touchscreen-based smartphones and stubbornly insisted that its enterprise users would stick with its keyboard-based devices. It also believed the fortified security of its BlackBerry devices would prevent its enterprise customers from switching over to iOS and Android devices.
However, the growing popularity of iOS and Android devices among mainstream consumers drove more companies to introduce bring-your-own device (BYOD) policies to allow the usage of personal devices for work. Apple, Google, and most Android device makers also upgraded their security standards to enterprise levels, which undermined the notion that only BlackBerry devices were secure enough for businesses and government organizations.
Second, BlackBerry's App World didn't host nearly as many apps as Apple's App Store and Google Play. Back in 2010, BlackBerry only offered about 2,500 apps, compared to 250,000 apps on the App Store and 100,000 apps on Google Play. Therefore, developers were less likely to develop new BlackBerry apps for that tiny market, which caused fewer people to buy BlackBerry devices because they lacked the latest apps.
Instead of quickly pivoting to Android to close that "app gap," BlackBerry stuck with its own operating system for its first group of touchscreen phones, which included the Storm (2008), Torch (2010), and Porsche Design P'9982 (2013). Those phones, along with its short-lived PlayBook tablet, all failed to gain a foothold in the mobile market.
Finally, BlackBerry launched its first Android phone, the Priv, in 2015 -- long after Samsung had emerged as the leader of the premium market. BlackBerry attempted to differentiate the Priv from other Android devices with more robust security features and a physical keyboard, but it simply couldn't justify its price of $700, which was roughly the same as the price of Apple's iPhone 6S, Google's Nexus 6P, and Samsung's Galaxy Note 5 that year.
The Priv's failure prompted BlackBerry to finally stop producing its own phones. It subsequently outsourced its brand and designs to TCL, a Chinese maker of cheaper Android devices, but that 11th-hour deal couldn't salvage BlackBerry's share of the smartphone market, which had fallen to about zero at the end of 2016.
What's next for the new BlackBerry?
As its smartphone business died, BlackBerry expanded its cybersecurity business with several acquisitions (most notably Cylance in 2019) while nurturing the growth of QNX -- the most popular embedded OS for connected cars and trucks -- to expand its IoT segment. It also sold a large portion of its patents to generate cash earlier this year.
This new BlackBerry is a lot leaner than the old one, and it expects its total revenue to increase at a compound annual growth rate (CAGR) of 12%-15% from fiscal 2023 to fiscal 2026. It believes that its cybersecurity business will clock a CAGR of 9%-12% as its IoT segment expands at a CAGR of 18%-22%.
Those growth rates seem stable, but BlackBerry will likely rely heavily on the expansion of the automotive market to boost its IoT revenue and offset the slower growth of its cybersecurity business, which faces intense competition from higher-growth endpoint security platforms like CrowdStrike and SentinelOne.
That said, BlackBerry should have a brighter future as a software company than as a hardware maker. However, I doubt its stock will return to the triple digits -- which would require more than a 20-fold gain from current levels -- anytime soon.
