After suffering a black eye, Research In Motion Ltd (NASDAQ:BBRY) may not have enough fight left in it to recapture market share and move its stock price higher. And even if BlackBerry can pull that off, it won’t be easy: It’s going up against two of the biggest tech giants in history.
What is BlackBerry thinking?
CEO Thorsten Heins either has a screw loose, or he’s a genius. He’s taken an interesting approach with BlackBerry Messenger, otherwise known as BBM. This messaging service was originally offered to Research In Motion Ltd (NASDAQ:BBRY) customers only. Now, Heins and BlackBerry are offering BlackBerry Messenger on Apple Inc. (NASDAQ:AAPL)’s iOS, and on Google Inc (NASDAQ:GOOG)’s Android OS.
The ultimate goal for Research In Motion Ltd (NASDAQ:BBRY) is to expose its products and services to users on other messenger services, but BlackBerry customers are also being exposed to the products and services offered by competitors.
BlackBerry isn’t as popular as Apple and Google Inc (NASDAQ:GOOG) when it comes to popularity. In the first quarter, BlackBerry OS lagged Apple Inc. (NASDAQ:AAPL) iOS and Google Android OS by wide margins for market share:
Google Android OS: 75.0% market share
Apple iOS: 17.3% market share
BlackBerry OS: 3.2% market share
Therefore, if a millennial is a Research In Motion Ltd (NASDAQ:BBRY) customer and he or she just wants to fit in, that individual might switch to Apple and Google.
Another big negative for BlackBerry is that it will lose BlackBerry Messenger fees, which accounted for 36% of its revenue last quarter. BlackBerry Messenger also has to go up against Facebook Inc (NASDAQ:FB) Messenger (over 1 billion users) and Microsoft Corporation (NASDAQ:MSFT)’s Skype (closing in on 300 million users).
BlackBerry Z10 and Q10
Research In Motion Ltd (NASDAQ:BBRY) shipped 6 million Z10 mobile phones last quarter, but this still wasn’t good enough to increase the company’s market share.
The just-released Q10 uses the new BlackBerry 10 OS, opposed to the older BlackBerry 7 OS. It also offers a full QWERTY keyboard, as opposed to an onscreen one. That being the case, the Q10 is likely to target a niche market of consumers that fell in love with the QWERTY keyboard on other mobile devices in the past.
And let’s not forget the Q5, which will be cheaper than most devices on the market. Research In Motion Ltd (NASDAQ:BBRY) hasn’t released pricing information yet, but it would be wise for the company not to come in too high. The price might be determined by how well the Q5 phone sells in Africa, the Middle East, and Asia.
Speaking of pricing, a big dilemma exists for the mobile device market. Believe it or not, it all ties in to Ben Bernake and his hint that he will begin to taper his monthly bond-buying program later this year. When the cheap money stops flowing, markets falter and companies cut costs — mostly employees. This vicious cycle ends up leading to a weakened consumer. When the consumer weakens, prices for products and services must be lowered — otherwise known as a deflationary environment.
Conclusion
The Z10 hasn’t led to increased market share, the Q10 will target a niche market, and the Q5 isn’t likely to be a big revenue driver. Research In Motion Ltd (NASDAQ:BBRY) is also taking a big risk by making its BlackBerry Messenger available to Apple and Google users. Furthermore, BlackBerry is trading at 43 times forward earnings — expectations are very high.
Even if BlackBerry manages to beat expectations for the quarter, it should only be a short-lived pop. BlackBerry’s revenue has declined over the past two years as well as 36% last quarter on a year over year basis. It would be difficult to imagine a scenario where BlackBerry improves the top line while fighting off its peers and a challenging macroeconomic environment.
Dan Moskowitz has no position in any stocks mentioned. The Motley Fool recommends Apple, Facebook Inc (NASDAQ:FB), and Google. The Motley Fool owns shares of Apple, Facebook, Google, and Microsoft Corporation (NASDAQ:MSFT). Dan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article BlackBerry’s Black Eye originally appeared on Fool.com and is written by Dan Moskowitz.
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