Could BlackBerry's next device look totally different from the BlackBerry Passport (above)? It's entirely possible if Samsung partners with BlackBerry. Image source: BlackBerry.
For many avid smartphone market followers, BlackBerry (BBRY +0.52%) is a cautionary tale against resting on one's laurels. After essentially turbocharging the smartphone category by its phone with email capabilities, the company zoomed up to as high as nearly $150 per share in 2008. Unfortunately for the Canadian firm, other tech companies, including Apple and Google, were able to build upon its shortcomings -- mainly a poor ecosystem with a lack of apps and music solutions -- to steal market share.
After floundering for years, the company finally hit a low point in 2013 when then CEO Thorsten Heins prepped the company for a sale to Fairfax Holdings at a price of $9 per share, a steep decline from 2008 highs. Eventually, Blackberry rejected the buyout offer, parted ways with Heins, and handed the reins to new CEO John Chen -- a well-known turnaround specialist. It's roughly a year and a half post buyout offer, and shares still hover near that $9 mark.
At the time of the buyout, many questioned the value of BlackBerry's handset business while recognizing the value that exists with its security-focused software and services including BlackBerry messenger, QNX software, its Enterprise Service, and its Internet of Things platform. If the newest rumors are true, it appears Chen is working to limit his ecosystem and device weaknesses with a new partnership that focuses on the company's strengths.
A Canadian and South Korean partnership
Recently, the rumor mill has been buzzing about a possible BlackBerry and Samsung (NASDAQOTH: SSNLF) device. While the rumors are still fluid, the hazy outline is the unit will be manufactured and (mostly) designed by Samsung, feature Google's popular Android-based ecosystem, and include a host of BlackBerry-specific apps like BlackBerry Messenger preinstalled. Essentially, this would allow each company to offer their best features and functions to consumers in one device.
For BlackBerry, there are obvious downsides as well. First, while we don't know the exact process yet, BlackBerry theoretically loses direct control in the design and the full profit/revenue share take of device sales. Last year, however, BlackBerry gave up a large portion of marketing and delivery strategy in its Z3 handset by allowing Foxconn the rights to distribute the product. On the flip side, this move should spare BlackBerry costly inventory writedowns like the $1.6 billion writedown the company recognized in 2014 as BlackBerry 10 failed to catch on in a meaningful way.
This has to be an enterprise play, right?
Overall, BlackBerry's value proposition is quite direct: If you are looking for security, you can't beat BlackBerry's operating system. While security is important to all, it generally is stressed more among enterprise buyers: governments and businesses that are responsible for protecting third-party data. More recently, however, many enterprises have embraced a bring-your-own-device arrangement where users purchase their own device and incorporate that into the organization's IT security framework.
As a result thereof, device security has become an elevated concern for prospective shoppers, as well as personal choices concerning ecosystem. In the past, BlackBerry has worked to bring its secure technologies on Samsung's Knox security platform, as well as and BlackBerry Messenger on both Android and iOS app stores. If these rumors are true, it's a wise move for Chen to accentuate his security focus while working to minimize his device and ecosystem weaknesses.
