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BlackBerry Tops Microsoft in Deal for Ford

By Daniel B. Kline – Feb 27, 2014 at 7:32AM

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BlackBerry may not be able to compete with Microsoft in the smartphone arena, but it has struck a blow against its competitor in a different area.

If BlackBerry (BB 0.83%) survives, it won't be as a maker of phones. Instead it will be as a provider of software to both consumers and other companies.

The company has taken a number of steps to ensure its survival recently, including naming John Chen CEO, releasing the popular BBM app for iPhones, Android phones, and Windows Phones, and aggressively marketing its software solutions. Though it's only a first step in a long, uphill battle BlackBerry has also scored a victory as Ford (F 0.15%) has chosen BlackBerry's QNX as the platform for its next-generation Sync system over Microsoft (MSFT -0.59%) (which powered previous versions), Bloomberg reported.

"Using QNX will be less expensive than licensing Microsoft technology and will improve the flexibility and speed of the next Sync system, the people," according to Bloomberg.

The loss of the deal is a blow to Microsoft as Ford was its top customer in the automotive sector, which is a growing market for software companies. According to Bloomberg, Ford currently has more than 7 million vehicles on the road with Sync using Microsoft voice-activated software to make mobile-phone calls and play music.

The phone game is over for BlackBerry

After taking one last swing at being a major player in the smartphone game with its Z10 phones, the company has clearly struck out. And though it continues to release new phone models, that is clearly a declining part of its business. As the chart below shows, the company has been steadily losing smartphone market share and Microsoft has climbed decidedly ahead of BlackBerry in the race for third place behind Google's (GOOGL -0.90%) Android phones and Apple's (AAPL -2.12%) iPhones.

Though BlackBerry does maintain a few strongholds for its phones -- mostly in developing markets -- its future lies in other areas.

How big a deal is gaining Ford for BlackBerry?

BlackBerry has had some success getting companies to license its products. Specifically its multi-OS enterprise mobility management system has been installed on nearly 30,000 commercial and test servers around the world, according to the company.

The Ford deal, however, gives BlackBerry a major partner and a foot firmly in the door in the expected-to-blossom in-vehicle technology field.

"This would be a huge infusion of trust and confidence to have BlackBerry and QNX expanding into a Ford," Thilo Koslowski, auto analyst for researcher Gartner told Bloomberg. "This is really the crown jewel in BlackBerry's crown and could make the rest of the company shine as well."

If Ford gives BlackBerry credibility, it could open up significant new business for the company.

In-vehicle technology is the top selling point for 39% of car buyers today — more than twice the 14% who say their first consideration is traditional performance measures such as power and speed — according to a December study by consulting firm Accenture, according to OnlineAutonews.com.

Can the new BlackBerry work?

Since its collapse as a smartphone company (largely due to its own inaction) BlackBerry went through numerous attempts at reorganization then was almost sold. Last September the company agreed in principal to be acquired by a consortium led by its biggest shareholder, Fairfax Financial, a Canadian insurance company, for $4.7 billion. That deal was announced a week after BlackBerry laid off 40% of its work force and said it expected to post a loss of almost $1 billion.

The Fairfax deal was ultimately called off and BlackBerry, without an official announcement, upped Chen to permanent CEO from the interim title he had held since Thorsten Heins was ousted. In the company's fiscal 2014 earnings release, the new CEO was confident about the change in direction.

"With the operational and organizational changes we have announced, BlackBerry has established a clear roadmap that will allow it to target a return to improved financial performance in the coming year," said Chen.

People still love BBM

Over 20 million Android and iPhone users downloaded BBM in its first week of availability, said BlackBerry in a press release. That gives the service more more than 80 million monthly active users as of October 2013. In its fiscal 2014 Q3 press release, the company claimed that as of December 2013, that number had risen to 40 million Android and iPhone users. 

A whole new BlackBerry?

Under Chen, who seems pragmatic and not married to the idea of recapturing BlackBerry's former glory, a revival seems possible. Though the company is only a short way down its new road, having Ford sign on as a partner is a major step toward recasting its business.

BlackBerry may never be a phone player again but if Chen continues to make solid deals like this one he has a chance to revive a company that many thought was already as good as gone.

Daniel Kline is long Microsoft. The Motley Fool recommends Apple, Ford, and Google. The Motley Fool owns shares of Apple, Ford, Google, and Microsoft. 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.

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