3 Reasons Why Research In Motion Ltd (BBRY) Lost Its Core

Apple is a great example.  Apple typically launches a new phone every year, and executives often joke that each new phone sells more than all previous versions combined.  Thus, while BlackBerry was busy figuring out how to design its device, Apple was busy training its customers to either buy its newest phone (earning Apple fat margins), or to buy the old version for a reduced price.  Moreover, Apple continued to add additional distribution through international networks.

Nokia Corporation (ADR) (NYSE:NOK) is another great example.  Since BlackBerry ’s last launch, Nokia has fallen into and almost emerged from a major crisis.  The company’s stock sunk down to $1.63 before rebounding to $4.70 earlier this year.  Nokia contrasts BlackBerry in that, while BlackBerry’s lagging technology caused RIM’s downfall, Nokia’s new technologies are its saving grace.  For example, Nokia’s new features like “tiles” and a cordless charger have transformed its phones into higher-end devices that even cost less than competitors.

Right now Nokia partners with the major U.S. carriers Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T) to push its new Lumia phones.  For example, Verizon offers the new Lumia 822 phone, which runs Windows 8, for free with a two-year contract.

And AT&T has two deals going.  Consumers can buy the Lumia 820 for $49.99, or they can pay $99.99 for the Lumia 920 and get a second one free, with a contract.

The extra distribution is great for Nokia.  AT&T added 150,000 net new subscribers in Q3 2012.  It followed up by adding yet another 1.1 million in Q4, with 780,000 subscribers being postpaid, or those who pay at the end of each month.  Likewise Verizon – which is giving away Nokia’s phone for free – added 1.5 million net new subscribers in Q3 and set a new record in Q4 when it added 2.2 million subscribers, 2.1 million of them postpaid.  In short, Nokia’s free or $50 phone has major distribution.

Conclusion

There is a difference between BlackBerry “the stock” and BlackBerry“the company.”  BlackBerry’s share price took off and made a lot of investors a great deal of money.  I applaud those who had the guts to buy near the bottom.  But BlackBerry as a company is a different story.

BlackBerry’s economics are quickly falling, the barriers to entry have eased, and BlackBerry no longer enjoys a “moat,” especially in the corporate world.  Furthermore, its previously loyal customers are fleeing to other devices.

All of this signals to me that BlackBerry is losing its core business.  And when businesses decline, eventually the stock price will follow.

The article 3 Reasons Why BlackBerry Lost Its Core originally appeared on Fool.com and is written by Chris Marasco.

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