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Did AT&T Just Save Blackberry?

By Daniel B. Kline - Feb 21, 2015 at 9:32AM

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The wireless carrier has thrown the struggling smartphone maker a lifeline.

Blackberry (BB -5.56%) has taken a major step toward becoming relevant again.

The company, which has seen its share of the wireless market slip below 1%, has made a deal with AT&T (T -0.35%) to carry its two newest signature phones the Passport and the Classic. This makes AT&T the only major wireless carrier in the United States to sell the smartphones.

Under the agreement AT&T will be the exclusive U.S. carrier for the Passport. Currently Sprint (S) sells Blackberry's older Q10 model while Verizon (VZ 0.18%) carries the Z30 and Z10 -- also older models. T-Mobile (TMUS -0.41%) does not currently carry any Blackberry models though it has in the past and the carrier still supports Blackberry devices on its network.

The AT&T deal gives Blackberry distribution for its two newest phones on the second largest carrier in the U.S. It's a big step for a company which had not only been fighting fading popularity but had lost its access to customers. Yes, it was possible to buy a Blackberry and use it on the various carriers, but that means not getting a subsidy or a financing deal and having a phone which may not be fully supported.

Now Blackberry devotees can buy the company's latest phones from AT&T with or without a subsidy. The deal might cause some lapsed Blackberry devotees to move to AT&T and it could lure in some existing customers of the wireless carrier who long for a phone with a keyboard.

The Blackberry Passport has a unique design. Source: AT&T

Why Blackberry needs this

As of the third quarter of 2014, Blackberry's market share had dipped to .5%, according to IDC. That's a big drop from even a year ago where the company had 1.7% of the global market and down from 9.6% in 2011. In three years the company had fallen from being a major player and became a rounding error on the IDC survey.

PeriodAndroidiOSWindows PhoneBlackBerry OSOthers
Q3 2014 84.4% 11.7% 2.9% 0.5% 0.6%
Q3 2013 81.2% 12.8% 3.6% 1.7% 0.6%
Q3 2012 74.9% 14.4% 2% 4.1% 4.5%
Q3 2011 57.4% 13.8% 1.2% 9.6% 18%

Source: IDC, 2014 Q3

Part of the reason for this fall is clearly due to the company's poor distribution, which IDC noted:

Blackberry OS remains below 1% share. While it launched the Passport late in third quarter, it was a limited release, which excluded any carrier tie ups in the US, and was thus mainly carried unsubsidized via online channels.

Blackberry had made it very hard for even its most diehard fans to get their hands on the company's new phones. As a former Blackberry devotee myself, I will say the company lost me when it went more than a year without offering a new model on my carrier (Sprint). I still miss having a physical QWERTY keyboard, which both the Classic and the Passport offer, and might be tempted to switch back if Sprint offered either one.

I would not, however, consider buying a Blackberry direct from the company and then trying to pair it to a network where it may or may not work (neither the Passport nor the Classic are sold in a Sprint-compatible model). The AT&T deal creates a clear option for the Blackberry diaspora to come home.

Of course, for many it will be too late, as people who once thought they could not live without a physical keyboard have learned that they can.

The Classic is a new take on the company's familiar phone design. Source: AT&T

A look at the deal

The Passport will be available from AT&T starting February 20 for $0 down on an AT&T Next plan at $21.67 per month for 24 months, $27.09 for 18 months, or $32.50 for 12 months. The carrier also offers a subsidized deal at $199.99 with a two-year agreement or you can buy it outright for $649.99.

The Classic is a little cheaper coming in at $14 per month on a 24 month deal, $17.50 on the 18 month plan, or $21 per month on the 12 month plan. You can also get the smartphone for $49.99 with a two-year agreement or buy it outright for $419.99.

Will this work?

Blackberry's comeback under CEO John Chen has been slow and steady and this is a solid move in that direction. Both the Passport and Classic should appeal to Blackberry's former user base. Both have traditional keyboards and both work the way the company's phones traditionally have (I have held the Passport, but have not tested it extensively).

The gains will be small as most Blackberry fans have moved on. Still, this at least puts the company back into the conversation and makes it possible for people to easily buy and use these phones. That's a big step on the company's journey back from .5% market share.

Daniel Kline has no position in any stocks mentioned. He really misses having a physical keyboard on his phone. The Motley Fool recommends Verizon Communications. Try any of our Foolish newsletter services free for 30 days. 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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Stocks Mentioned

AT&T Inc. Stock Quote
AT&T Inc.
T
$18.36 (-0.35%) $0.07
BlackBerry Stock Quote
BlackBerry
BB
$6.38 (-5.56%) $0.38
Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
VZ
$44.27 (0.18%) $0.08
Sprint Corporation Stock Quote
Sprint Corporation
S
T-Mobile US, Inc. Stock Quote
T-Mobile US, Inc.
TMUS
$146.25 (-0.41%) $0.61
Apple Inc. Stock Quote
Apple Inc.
AAPL
$172.00 (-1.24%) $-2.15

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