Please ensure Javascript is enabled for purposes of website accessibility

What the BlackBerry Passport Tells us About the Company’s Future

By Chris Neiger - Aug 19, 2014 at 11:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

BlackBerry's Passport is yet another signal that the company's future lies in the hands of its bread and butter users.


It's time to get down to business. Source: BlackBerry.

Let's look past the Passport's square shape for a moment. Sure, it's the most noticeable feature on BlackBerry's (BB 7.08%) newest device, but it's more important to focus on why the device takes this shape.

The company's CEO, John Chen, is in the middle of turning around the company, and for BlackBerry that means refocusing on enterprise customers -- and the Passport is the physical representation of that strategy.

Why Blackberry needs to be different
It's easy to think the Passport's boxy design is just to differentiate itself from the masses of iPhones and Android phones on the market. The device features a 4.5-inch square screen with a 1,400 x 1,400 pixel display, and a recent partnership with Amazon.com ensures a ton of Android apps will run on the device.

But at the heart of the Passport is BlackBerry's attempt to lure back its core customer base, which has always been the enterprise sector. The display size offers a wider view of documents and the large physical Qwerty keyboard allows for easy typing. Even the Passport's name evokes a business persona. And that's a good thing. Chen has said that 80% of the company's mobile subscribers are business users.

But BlackBerry's faced headwinds in the enterprise market lately, as Apple's (AAPL 2.45%) made some huge gains in the business world. A recent report from Good Technology showed the iPhone far outpaces enterprise sector activations in the second quarter compared to Android and Microsoft's Windows Phone.


Source: Good Technology.

It's worth noting that BlackBerry was excluded from the data because Good Technology doesn't have access to net enterprise activations on BB10 devices through its services.

On top of Apple's gains, the company's latest partnership with IBM should help push its enterprise mobile sales even higher, leaving BlackBerry even further behind.

Vision and execution
BlackBerry knows one of its only plays in the mobile handset space is to double down on enterprise. That's one of the reasons why it purchased the German-based voice and data encryption company, Secusmart, last month. The company brings mobile and landline security to business and governments and it could help BlackBerry set itself apart from Andorid and iPhone in the sector.

Chen's management seems to be turning around some aspects of the company though, even if just a little. Adjusted operating expenses decreased 57% year over year, helping BlackBerry post a profit of $23 million in its 2015 fiscal first quarter.

But much of BlackBerry's cost-cutting measures are complete, and now it's time to boost sales -- in Q1 revenue fell 69%, to $966 million. Hardware sales, including handsets, will be a big part of this. In the most recent quarter, hardware sales made up 39% of the company's revenue.

Though the Passport could prove to be a smart move in winning back enterprise users, or at least holding on to current ones, we have to be realistic about BlackBerry's current position.

Just last week IDC released its latest smartphone vendor data, and BlackBerry's struggling even more than before. In Q2 2013, the company had 2.8% worldwide smartphone market share. But in Q2 2014 that fell to just 0.5%.

The company can't continue to experience drops like this in the worldwide market, battle Apple in the enterprise sector, and still have a fighting chance in selling lots of mobile handsets. So while the Passport shows BlackBerry is committed to its future with business users, we'll have to wait until the device launches next month to see if the feeling's mutual.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
AAPL
$141.66 (2.45%) $3.39
BlackBerry Stock Quote
BlackBerry
BB
$5.75 (7.08%) $0.38

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.