Next month, BlackBerry's (NASDAQ:BBRY) Passport smartphone will make its way to U.S. customers, once more vying for market share amid a sea of Android and iOS alternatives. Can it win? Let's review how BlackBerry pitches the device.
Specifically, BlackBerry says that the rectangular design common to modern smartphones may be "limiting innovations" as it limits screen space. The Passport offers 4.5-inch square HD screen that allows for 60 characters on a line versus 40 for most rectangular smartphones. Partnering with Amazon.com to provide access to over 240,000 Android apps is a welcome bonus.
"The BlackBerry Passport offers its size and aspect ratio to accommodate these characters, making it the ideal device for reading e-books, viewing documents and browsing the web. No more worrying about portrait or landscape modes, and no; you aren't missing anything," says writer Matt Young in a recent post at the Inside BlackBerry blog.
To some, that's likely to come off as unconvincing justification for a boxy, ugly design that's more reminiscent of the original BlackBerry pager than a modern smartphone. To others, it may be just the unconventional pitch they've been waiting for. Either way, the Passport is critical to BlackBerry's future.
The Passport: a doorway to more business
Yes, I know how that sounds, especially in light of CEO John Chen's commitment to diversifying the business. Hardware sales accounted for only 39% of revenue in the most recent quarter.
And yet diversify doesn't mean ditching hardware altogether. Rather, Chen and his team are busy cultivating new QNX-based ecosystems for devices like the Passport to plug into. For those who don't know, QNX is an operating environment that powers the BlackBerry 10 mobile operating system used by the Passport, as well as Internet routers, navigation systems, and NantHealth's hospital network. It's an ambitious strategy that calls for BlackBerry to win back the enterprise market one lucrative niche at a time.
As Chen put it in the last earnings call: "When we have a chance to lay out our plans and visions, the majority of the time, we get [enterprise customers] to support us, to stay there. What I have found is people like to stay with BlackBerry. They were concerned a little while back, and I need to try to regain back that confidence."
Smarter hospitals = a smart strategy
BlackBerry announced its investment in NantHealth in April. The deal allows the company to shape and add capabilities to a network that's already based on QNX and which connects some 250 hospitals and 16,000 medical devices around the globe.
You can bet that BlackBerry will be pitching the Passport at every North American hospital where NantHealth has a presence, and pitching related handsets in overseas markets.
Now imagine this same strategy repeated in other niches and in different geographies. First, you acquire or invest in a QNX-based ecosystem. Then, add capabilities. Finally, sell hardware to take advantage of said capabilities. Rinse, repeat, profit.
OK, maybe it's not that easy. And yet if Chen is right and 80% BlackBerry's 50 million subscribers are business users, then it makes sense for the company to focus its efforts on niches with above-average budgets and defined needs. Healthcare is that sort of market.
A better Blackberry
Meanwhile, the underlying business is improving -- even if you might not know it looking at the financials. Fiscal first quarter revenue fell 69% to $966 million, resulting in an $0.11 loss. The good news? BlackBerry only suffered a $0.13 per share loss in last year's Q1.
Apparently, that's cause for enough optimism to cease job cuts. In an internal memo obtained by Reuters, Chen said BlackBerry had largely completed the restructuring process started three years ago. He also announced plans to "add headcount" in product development, sales, and customer service in "modest numbers." BlackBerry has eliminated about 60% of its workforce since cuts began.
Now, Chen gets to put away the axe and focus on growth in markets dominated by business users with highly specific needs. BlackBerry Passport is key to strategy, and we won't know whether the company is truly "back" until we see how business buyers take to the device. Keep your eyes on the sales charts.
Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. Check out Tim's web home and portfolio holdings or connect with him on Google+, Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.
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