Instead of concentrating on the enterprise services sector to the exclusion of all else, the newly appointed CEO of BlackBerry (BBRY 2.42%) says the smartphone maker has no intention of giving up sales of its namesake phones. Maybe he should rethink that.
A new market share survey from comScore shows Apple (AAPL 0.39%) remains the dominant OEM leader in terms of U.S. subscribers with a better than 40% share of the market, well ahead of Samsung's 25% take. HTC, Motorola, and LG follow respectively, but all have single-digit share. BlackBerry no longer ranks among the top five OEMs.
When we look at the platforms of these companies, we see BlackBerry is becoming almost irrelevant as well. Where Android owns over half the market and together with Apple's iOS they command more than 90% of U.S. subscribers, BlackBerry's share has dwindled away to just 3.8%, down from 4.4% in June. While some hay can be made that it's still beating Windows Phone at the moment despite the latter's head start in the marketplace, it's clear that whatever BlackBerry's future is (and that's not very clear at all), it's not in smartphones..
It's only a matter of time before BlackBerry succumbs, though who would've guessed there are some people still using Nokia's Symbian OS?
I've always been skeptical that Prem Watsa would follow through on his bid to take the smartphone maker private via Fairfax Financial (FRFHF +0.39%), believing that due diligence would cause him to back out of the plan. When BlackBerry announced on Monday the proposal was over and it wasn't looking for buyers anymore, it wasn't exactly vindication though. Watsa wasn't completely scared by what he saw (though others who might have helped him take it private apparently were), as he's gathering $1 billion in convertible debentures to invest in BlackBerry, with Fairfax fronting up to $250 million in convertible unsecured debt and other investors kicking in the remaining $750 million.
With BlackBerry ousting CEO Thorsten Heins in favor of Watsa's hand-picked successor John Chen (and Watsa installing himself as lead director), there's a big attempt to make a real go of it as a viable company. But there are big doubts, too.
Had BlackBerry's leadership also decided the smartphone was a losing battle and it would be better to concentrate instead on the enterprise security market, I might have had more confidence in the overall direction the company was heading. The appointment of the tech-savvy Chen by all accounts is a smart one, and his statements on reviving the enterprise brand are encouraging.
But the comScore survey shows that BlackBerry is fading away, and other surveys put it in an even worse light. Strategy Analytics says the BB OS has fallen all the way down to just a 1% share of the market, from more than 4% a year ago, while the Windows Phone surged to a 4.4% share. Android, of course, dominates at more than 80%.
All of which means BlackBerry's decision to continue selling smartphones into a market that no longer wants them will serve as a distraction for management. Far better to lop off the gangrenous limb so the rest of the company can survive.
It still seems to me Watsa suffers from a bit of investment bias because he's dumped so much money into BlackBerry. As successful as he's been, in a number of his investments he's also had some spectacular failures. From property and casualty insurer TIG Holdings and Xerox's Crum & Forster division, to Canadian publishers Torstar and CanWest, there have been several big flameouts over the years. I happen to think BlackBerry will be another one of them.
Fairfax Financial may have deftly avoided hedge fund manager Jim Chanos' prediction that it was going to go bankrupt, but that doesn't mean Watsa will hit pay dirt with BlackBerry. There's a disconnect here and even if Watsa won't, investors might want to consider hanging up on their investment in the smartphone maker.
