On Thursday BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) officially launched the Leap smartphone in Canada. Notably, the Leap does not have a physical keyboard, something that may leave some people (including shareholders) feeling confused.
On that note, we highlight what investors need to know about the Leap.
A focused target: BlackBerry has high hopes for the Leap
In years’ past BlackBerry has been very ambitious when launching new phones, and tried to generate major buzz for its new products. For instance, when introducing the Z10 the company aired a Super Bowl commercial. The ad was short on specifics, instead showing in 30 seconds “all the things it can’t do.”
BlackBerry certainly had high hopes for the new phone, and was trying to appeal to a mass audience. And this was only two years ago, well after the company’s decline had started.
With the Leap, the story is very different. BlackBerry’s commercial begins with the phrase “You are a start-up” in the attempt to speak to ambitious young people, above all, to entrepreneurs. This is a much more specific target audience than phones like the Z10 ever had.
So, if you’re a shareholder and you aren’t too optimistic about the Leap, you don’t need to sell your shares. BlackBerry is simply trying to appeal to a select group of people: those who like BlackBerry, but have become used to a touchscreen. This tends to be a younger crowd.
A lower-cost base
As we all know, the Z10 was an unmitigated disaster, resulting in nearly US$1 billion in write-downs. Fortunately, that kind of outcome is impossible with the Leap, no matter how poorly it sells.
When John Chen took over as CEO, he made a very important move: he outsourced manufacturing to Taiwanese giant Foxconn. As a result, BlackBerry simply develops the phones now, and is no longer stuck with the inventory risk. So, even if no one in Canada buys the Leap, BlackBerry will not be reporting these kinds of write-downs.
All about the brand
The Leap is just one of many new phones introduced by BlackBerry in recent months. Others include the Classic, which is meant to appeal to BlackBerry diehards, and the Passport, which comes with a large square screen. This has left many investors wondering why BlackBerry is releasing so many new phones. After all, isn’t the company focused on enterprise software now?
Well, yes and no. BlackBerry is shifting its focus towards software, but the company’s brand is still tarnished by declining smartphone sales. Many people are still questioning the company’s long-term survival. And that’s hurting the software division too, because software customers will need maintenance and upgrade services in the years ahead.
For this reason, BlackBerry will eventually have to turn this slide around, and shareholders are hoping the Leap will play a part in that. We will see.
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Fool contributor Benjamin Sinclair has no position in any stocks mentioned.