Should Investors Take a Leap of Faith With BlackBerry Ltd.?

BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) is looking to take the hardware and software market by storm, but is it a possibility or a pipedream?

| More on:

Not long ago, BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) CEO John Chen declared that “if BlackBerry can’t sell 10 million phones per year, it shouldn’t be in the hardware business. In the time since, BlackBerry has launched the Passport and a new version of its Classic model, and has managed to grow sales and garner positive consumer reviews.

Investors are left wondering if this is a resurgence of the once mighty Canadian tech company or just a flash in the pan.

Leapfrogging the competition?

The next step for BlackBerry and its hardware ambition is the recently revealed Leap, an all touchscreen smartphone with a minimal price tag. The Leap has been priced at a low non-contract price of US$250, compared to the industry staple iPhone 6 at $750 and Samsung Galaxy S5 at $700. With this new phone, BlackBerry is targeting what they call “career builder users,” Also known as millennials looking to take advantage of BlackBerry’s business-friendly infrastructure.

The low price point combined with access to the Amazon App store should help BlackBerry eventually meet its 10 million-devices-per-year goal. One analyst already projects that BlackBerry should be in the seven to eight million range for hardware sales in 2015, compared to 5.8 million in 2014.

In order to bolster its hardware sales, BlackBerry is reportedly looking to unveil an additional four new devices in 2015. One device is code-named the Slider, a touch phone with a slide out QWERTY keyboard under the screen. Sales will also be helped now that the Passport and Classic are available in the U.S.

Software salvation?

While BlackBerry’s hardware division is still lagging behind where it was six years ago, its new push towards its software offerings could reshape the company. The beginnings of this software revolution came when BlackBerry made its BBM service available on the Apple and Microsoft app stores, a move that netted BlackBerry 200 million users.

It is these first steps to de-monopolize the company’s software from its hardware that may well have saved the company’s future. This software-first mentality is now transforming into an expansion into the Internet of Things and cloud computing, as BlackBerry will now be offering a cloud version of its mobile security system.

Then there is the recent partnership with Samsung, which sparked rumours of a buyout and sent the stock price soaring. The actual partnership involves BlackBerry enhancing the security of Samsung’s Knox platform with the BlackBerry Enterprise Server 12. Many investors and analysts that saw the depth of cooperation between these two companies jumped to the conclusion that Samsung should buy BlackBerry.

Perhaps there is another way to look at the possibilities of this partnership. Maybe BlackBerry could contract out its hardware production capabilities to Samsung and focus more of its internal resources to software development. This scenario becomes less unrealistic when we consider the comments made at the Mobile World Congress by BlackBerry’s UK head of enterprise Mike Gibson, who regularly described BlackBerry as a “software company.”

Dialing for dollars

BlackBerry is still in recovery mode, and even if all of its new hardware options sell well, the company may never recover its market share. Since 2009, BlackBerry’s worldwide market share has plummeted to 0.4%, despite its popularity with business and government customers. It is the software BlackBerry offers which could be the true key to its recovery, be it the Internet of Things, increase use of cloud computing, or continued integration in Android devices.

Investors will now wait anxiously for March 27, when BlackBerry releases its next financial report, which should set the path that the stock price should take for the year. BlackBerry closed Thursday at $13.61, still riding high from the Samsung acquisition rumours. The price still looks rather high, as the 52-week range is $7.69 -15.10 and has an average price target of $9.41.

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 Cameron Conway has no position in any stocks mentioned. David Gardner owns shares of and Apple. The Motley Fool owns shares of and Apple.

More on Investing