What Does BlackBerry Ltd.’s Leap Phone Mean for the Company?

BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) unveils the Leap phone. How should shareholders react?

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BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) CEO John Chen has made plenty of headlines at the Mobile World Congress trade show this week. This includes the unveiling of the company’s latest phone, the BlackBerry Leap. So, what exactly is this phone all about and what does it mean for the company? We take a look below.

Targeting a younger audience

The Leap is intended to appeal to “career building” young professionals or businesses. In other words, the typical user would be a young entrepreneur.

To appeal to these users, the Leap comes with a few appealing features. First, and perhaps most important, is the US$275 price tag (without a contract). This is well below devices like the iPhone 6. Second, the device comes with a touch screen, something that ideally appeals to the younger crowd.

The phone has some other nice features, including a five-inch screen, with a 720p HD resolution display. It also has an eight-megapixel rear camera and 16GB of storage. It’s generally been well received, although whether that translates into sales is another question.

Don’t expect too much

I know what you’re thinking: what exactly is BlackBerry doing making a touchscreen phone? Is that really what its loyal customers are looking for? Haven’t previous attempts at a touchscreen phone flopped? These are all valid points, and the mid-market phone segment is very crowded as well. So, I wouldn’t expect this phone to sell too well.

Software is what really matters anyway

There’s another reason why the Leap is unlikely to do well. BlackBerry is making the bulk of its most valuable apps available on other devices, including the iPhone. It’s part of the company’s strategy to shift away from hardware and move towards software. This is something I recently wrote about.

So, why exactly is the company releasing this phone? Just remember that BlackBerry’s handset business is much leaner ever since outsourcing production to Taiwanese manufacturer Foxconn, so the Leap doesn’t need fantastic sales to break even.

Keep your eye on the prize

If you’re counting on the Leap phone to be a game-changer, you’re likely to be very disappointed. That said, if the Leap appeals to a select group of young entrepreneurs, who then fall in love with BlackBerry, these same people could become big-enterprise customers down the road. In that scenario, the phone will be worthwhile.

Until then, BlackBerry shareholders should focus more on the software side, just like Mr. Chen is doing. This is what will ultimately make the biggest difference in the company’s share price.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair has no position in any stocks mentioned.

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