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Is Wall Street Dumping BlackBerry Ltd.?

Are America’s biggest banks giving up on BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY)? Well, according to a new report from Business Insider (BI), many of them are.

So, why does BI believe this is happening? And why are banks doing this? Most importantly, how should you react as an investor?

A wave of exits

According to one of BI’s anonymous sources, JPMorgan Chase & Co. will soon require all its employees to turn in their bank-issued BlackBerry handsets. This would be a big loss for BlackBerry—JPMorgan is America’s number one investment bank, with an 8.1% market share.

And JPMorgan isn’t alone. Apparently Citigroup Inc employees have been encouraged to give up their BlackBerrys. Credit Suisse has seen its BlackBerry usage decline by 75%. Goldman Sachs has developed its own mobile email app, which only works on Android and iOS devices.

This should be particularly concerning for BlackBerry. The company’s biggest strength is security, and security is of utmost importance to financial institutions (for good reason). For example, JPMorgan CEO Jamie Dimon recently predicted the company would double its US$250 million annual computer-security budget within five years.

Why is this happening?

According to the BI report, big banks are looking to save money by requiring employees to use their own smartphones. This is more commonly known as the “Bring your own device” (BYOD) trend.

Fortunately for BlackBerry, it competes in the BYOD space as well. The company’s BES12 system supports iOS, Android, Windows, and BlackBerry devices. So, these banks could still use BlackBerry.

But these kinds of reports should still be very concerning, mainly because it further damages BlackBerry’s brand. Remember, the longer that BlackBerry is known as a company in decline, the harder it becomes to sell any software services. So, these kinds of trends simply have to be reversed.

How should investors react?

We already knew that BlackBerry is fighting an uphill battle in the mobility management market. Reports have surfaced that BlackBerry’s offerings simply aren’t catching on, and numbers have been disappointing thus far. Competitors such as Microsoft have entered the fray, and are offering steep discounts.

So, investors should brace themselves for some disappointing numbers, at least over the next 12 months. In the long term there is a lot more value, especially from an acquirer’s point of view. Thus only patient investors should hold BlackBerry. The BI report doesn’t change that.

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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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