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Blackberry finds it hard to recover its magic formula
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It was once so addictive it inspired the nickname “CrackBerry.” US President Barack Obama confessed to being among the millions of devotees who couldn’t bear to stop tapping feverishly away on its tiny keyboard. Madonna once said she slept with hers under her pillow.
Then came the iPhone.
Users newly addicted to Facebook and photo-sharing and Angry Birds started flirting with the opposition. And as more smartphones flooded the market with their supersize Samsung screens and thousands of apps, the BlackBerry failed to keep up with the flash.
This year's launch of BlackBerry 10, its revamped operating system, and fancier new devices — the touchscreen Z10 and Q10 for keyboard loyalists — was supposed to rejuvenate the brand and lure customers. But the much-delayed phones have failed to turn the company around. At their peak in the fall of 2009, BlackBerry's smartphones enjoyed global market share of more than 20 percent, says Mike Walkley, an analyst with Canaccord Genuity. Their share of the market has since evaporated to just 1.5 percent.
Now the company says it will lay off 4,500 employees, or 40 percent of its global workforce, as it tries to slash costs by 50 percent and shift its focus back to competing mainly for the business customers most loyal to its brand. A week earlier than expected, BlackBerry surprised the market by reporting on Friday that it lost nearly US$1 billion in the second quarter. It’s booking over US$900 million in charges to write down the value of its glut of unsold smartphones.
Smaller player
“This is the end of the BlackBerry as we know it,” BGC analyst Colin Gillis said from New York. “This is a major pivot. They are cutting half of their employees and they’re going to focus on becoming a niche player focused on the enterprise.”
Gillis said he doesn’t expect to see a BlackBerry advertisement on television again.
He said it might be more interesting for a prospective buyer, though, now that it has announced the restructuring. Gillis thinks it’s possible that BlackBerry could survive as a much smaller player. At the end of the second quarter, the company had total cash and investments of about US$2.6 billion and no debt.
“That’s probably the feedback they’ve been getting. They don’t do all this if you have a buyer lined up,” Gillis said. “Some of the actions may have been driven by feedback by potential buyers down the road. Nobody wants to come in and buy the company and hold an all hands meeting and say, ‘By the way, half of you are fired.’”
BlackBerry, formerly known as RIM, was once Canada’s most valuable company with a market value of US$83 billion in June 2008, but the stock has sunk from over US$140 share to under US$9.
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