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BlackBerry: Making a Big Bet on Physical Keyboards in Future Models

By Daniel Sparks - Jan 8, 2014 at 10:00AM

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Despite Apple's enormous success without them, BlackBerry wants to bet heavily on physical keyboards in future models.

Less than two years ago, BlackBerry (BB 1.11%) unveiled its first smartphone without a physical keyboard, allegedly in an attempt to more effectively compete with Apple (AAPL 1.62%). Today the company has a number of devices without keyboards. The move to touch keyboards hasn't helped the company pull itself up out of the doldrums. Since the first model was unveiled, shares have slid from levels above $12 to $8.50 at the time of this writing. Though BlackBerry has initiated a number of major changes in an attempt to get the ball rolling again, including a management shakeup, there has been no plan to prominently return to the physical keyboard until now. Will the strategy work?

BlackBerry's love for keyboards
"I personally love the keyboards," BlackBerry CEO John Chen told Bloomberg at the Las Vegas Consumer Electronics Show on Monday. Going forward, Chen said, BlackBerry's phones will "predominantly" have keyboards again. Notably, he emphasized that BlackBerry models won't "exclusively" feature physical keyboards.

The move goes contrary to Apple's iPhone, which has never sported a physical keyboard. Apple's iPhone revenue in its most recent quarter hit a record fourth-quarter high of $19.5 billion, easily trumping BlackBerry's total revenue in its most recent quarter of just $1.2 billion.

At the same time, BlackBerry is suing a company called Typo. Typo offers a physical keyboard that attaches to Apple's iPhone.

The move to a physical keyboard as a major focus for the company is part of BlackBerry's efforts to rekindle its relationship with corporate and government customers.

Will it work?
Though there are certainly fans of BlackBerry's keyboard, it's tough to get on board with BlackBerry's decision. Even if it helps BlackBerry build trust with physical keyboard enthusiasts, it proposes a natural counterargument: BlackBerry is looking backwards in an industry that typically looks forward. What about the younger generations, so used to iOS and Google Android touch keyboards? Is BlackBerry stubbornly trying to get the last puff on a used cigar as it struggles to innovate?

Apple saw tremendous success when it followed Steve Jobs' forward-looking visions. BlackBerry is focusing on a limited market of the past. Will physical keyboards ever be a major part of the future of smartphones? Probably not.

On the other hand, BlackBerry's stock certainly isn't priced for major success. So this might make sense. After all, BlackBerry trades at just one times book value and 0.5 times sales. Compare that to Apple's valuation of 3.9 times book value and three times sales. The stock certainly isn't priced for much.

At the end of the day, however, thinking backwards likely won't work in an industry that is always evolving and pushing the limits of what consumers are used to. Returning to the past is not innovation.

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