The stock dropped 30% in June, leaving it down 95% since its high of $230 way back in 2007. Now that BlackBerry Ltd (NASDAQ:BBRY) has hit this new low, it can only go up, right? Wrong. The name change isn’t going to save the firm and I think it still has plenty of room to fall.
Here are two reasons why BlackBerry is still a sell.
1. Losing Washington
Back in 2008, BlackBerry Ltd (NASDAQ:BBRY) was top dog in the new smartphone market. With a 41% share of the US market, BlackBerry looked strong and promising.
However, once competition heated up, Apple Inc. (NASDAQ:AAPL)’s iPhone and Google Inc (NASDAQ:GOOG)’s Android knocked BlackBerry off of its throne. Today, BlackBerry owns just 4.8% of the smartphone industry. Still, the one place where BlackBerry remained dominant is Washington D.C. Believe it or not, the government is far behind the American people and most government agencies still run with government issued BlackBerry Ltd (NASDAQ:BBRY) smartphones. Now, the competition is setting its sights on BlackBerry’s last piece of the market.
South Korean electronics giant Samsung (NASDAQOTH:SSNLF) is reportedly close to landing deals with both the FBI and the US Navy, moves that threaten BlackBerry’s dominance in Washington. The deals are small, but they highlight Samsung’s recent push to compete for contracts with government agencies and other enterprises. Samsung invested heavily in beefing up security on its devices so that they could be used in a government capacity, and the new government devices will come with the firm’s new Android based security technology labeled KNOX.
Currently, BlackBerry Ltd (NASDAQ:BBRY) has a huge lead in the Department of Defense (DoD) with 470,000 devices in use – 90% of the department. However, most of the devices are running on old BlackBerry platforms from which the Canadian tech company is moving away.
When the DoD finally decides to upgrade, will the department upgrade to BlackBerry’s 10 series? Or will agencies instead go the way of the consumer market and opt for Apple Inc. (NASDAQ:AAPL) or Android? I think the latter is more likely because the government can’t afford to ignore superior technology any longer.
With 41,000 devices in use in the DoD, Apple Inc. (NASDAQ:AAPL) seems to be gaining traction with its iPad and iPhone. Apple was the first to venture into BlackBerry’s territory, and the firm is slowly advancing. Already Apple holds 8% of the DoD. Furthermore, in February, Apple succeeded in landing a $159 million, 10-year contract with the New Zealand police force. Apple was chosen over favorite – you guessed it – BlackBerry. BlackBerry is losing more than just the U.S. government, and the battle will only intensify as Samsung jumps in.
Samsung’s orders may be small, but the company is only trying to get its foot in the door. Once the firm lands its first few contracts, it will be seen as more credible and will be more likely to land future deals. BlackBerry’s last stronghold is coming under fire, and if the consumer market is any indicator, BlackBerry Ltd (NASDAQ:BBRY) doesn’t have what it takes to defend its turf.
2. Still shrinking
Amid continuing financial woes, BlackBerry laid off another 250 employees from a testing facility at the firm’s headquarters in Ontario, Canada. Layoffs are nothing new for BlackBerry, as the firm laid off over 5,000 employees in 2012. Still, the fresh round of cuts signals that BlackBerry’s long restructuring plan is still in the downsizing phase while investors are anxious for signs of a turnaround.
Furthermore, BlackBerry Ltd (NASDAQ:BBRY) senior executive David J. Smith abruptly resigned, leaving the firm’s PlayBook tablet floundering. Smith was in charge of the largely unsuccessful PlayBook division that wrote off $500 million in unsold PlayBook inventory for 2012. Once CEO Thorsten Heins announced that the PlayBook would not be upgraded to BlackBerry 10 (effectively terminating the device), Smith’s job was likely deemed unnecessary.
Smith is the latest in a string of executives to resign. He was preceded by the chief of U.S. sales and two additional senior managers in charge of social media. The constant turnover tells us that things aren’t improving for BlackBerry, and investors should continue with a pessimistic outlook. Whether BlackBerry is losing senior executives or low-level employees, further downsizing indicates that the firm is moving in the wrong direction.
Bottom line
BlackBerry Ltd (NASDAQ:BBRY) is finished. The company is looking for a rebound, but it simply has nowhere to turn. Apple and Samsung will continue to take BlackBerry’s last hold-out, and BlackBerry will sink further into irrelevancy. What’s more, the flood of departing employees underscores the fact that BlackBerry isn’t nearing a turnaround.
The article 2 Reasons Why This Tech Firm Is Still a Sell originally appeared on Fool.com and is written by Marie Palumbo.
This article was written by Randy Holcombe and edited by Chris Marasco. Chris Marasco is Head Editor of ADifferentAngle. Neither has a position in any stocks mentioned.The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Marie is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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