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BlackBerry Ltd. Attacks Apple Inc.: Will it Work?

BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) has a long-standing reputation for security, but that hasn’t prevented its smartphone market share from shrinking to under 1% from over 20% since 2011. Because nearly all of BlackBerry’s latest smartphones have been disappointments, the company has struggled heavily with turning a profit.

Still, this week BlackBerry attempted to stem the tide by releasing “the world’s most secure Android smartphone.” There’s no doubt that BlackBerry hopes to fight off the success of Apple Inc.’s (NASDAQ:AAPL) iPhone, which has stolen many of its contracts. For example, a few years ago 17,600 users in U.S. Immigration & Customs Enforcement were switched from BlackBerry devices to Apple’s iPhone after it was determined that Apple could better meet the department’s security requirements.

Is BlackBerry finally ready to fight back against Apple?

A little too late

BlackBerry’s newest device, the DTEK50, is a lower-cost phone attempting to compete in the global Android smartphone market. The phone’s price starts at just $299–a big drop from BlackBerry’s previous options. The Priv, for example, debuted at over $600.

The low price means that the phone won’t have many of the specifications that long-time smartphone users will expect, namely adequate battery life, processing speed, and memory. The expected battery life is so low that BlackBerry includes additional battery packs with the phone for $59.99.

With such limited specs, it’s hard to see what the market will be for BlackBerry’s new device. When it comes to high-level security, most major companies and governments will demand much greater capabilities. And while BlackBerry has said the device is the “the world’s most secure Android smartphone,” that statement is carefully written to avoid direct competition with Apple’s iOS platform.

If BlackBerry can’t market a phone to high-end customers, it’s extremely doubtful that it can turn a profit entering the ultra-competitive low-end market for smartphones, where no hardware company has been able to generate a consistent profits. Even BlackBerry’s CEO knows this will be a dead end. “I personally do not believe devices are going to be the future of any company,” he said earlier this year.

BlackBerry needs to give up

With BlackBerry posting a $238 million loss last quarter and another loss expected this quarter, BlackBerry really doesn’t have a choice; it has to shed its hardware business. At the company’s latest investor meeting, Chen was asked about BlackBerry’s lack of marketing for its latest phones. He responded that the company simply couldn’t afford it.

This month the company started to wind down its efforts, revealing that it will discontinue production of its Classic cellphone model. Other outlets also reported that BlackBerry has told major U.S. carriers such as Verizon Communications Inc. and AT&T Inc. that all devices running BlackBerry 10 will be discontinued. According to The Globe and Mail, BlackBerry is finally starting to “shift its focus further away from its money-losing handset business and toward its software.”

If you’re excited about BlackBerry’s latest DTEK50 device, don’t be. The future will undoubtedly be 100% based on software revenues, not smartphones.

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Fool contributor Ryan Vanzo has no position in any stocks mentioned. David Gardner owns shares of Apple. The Motley Fool owns shares of Apple and Verizon Communications and has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. Verizon is a recommendation of Stock Advisor Canada.

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