On June 11, Reuters reported that BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) is considering manufacturing phones that would run Google’s Android operating system. Because the company’s revamped line of devices failed to win mass appeal, another pivot is necessary to keep the company alive.
CEO John Chen was quoted a few weeks ago saying: “I’m not at liberty to tell you what we’re doing beyond the Amazon apps, but we’re working hard at it…something [is] brewing…”.
There are a few reasons to believe the company can succeed.
BlackBerry still has global brand power
In most countries, Samsung smartphones dominate the smartphone market due to their affordability and seemingly limitless variety. There are still a few largely populated international markets where BlackBerry still dominates however.
In South Africa (50 million people) and Indonesia (250 million people), many BlackBerry models still hold market-leading positions. Even where adoption rates are low, BlackBerry is still one of the more recognizable brands out there. In creating a phone with a powerful, user-familiar interface such as Android, the company should be able to more properly leverage its name to millions of potential adopters.
Eliminating a major hurdle to mass adoption
Previous products haven’t competed well from a lack of available apps due to BlackBerry’s shrinking usage among smartphone users (less than a 1% market share). App creators are loath to develop new apps for a miniscule and ever-shrinking target market. Partnering with Google’s Android system would solve the major issue of a limited app store.
People simply don’t buy handsets anymore; they buy into complete ecosystems. By using the Android system, BlackBerry can better integrate music, user media, and cloud storage. It would also enable BlackBerry phones to synchronize data across all android devices. Having a phone that works with a customer’s tablet, laptop, TV set-top box, and desktop is a must.
Could finally position hardware for a sale
If there’s one segment that BlackBerry hasn’t been able stop the bleeding in, it’s mobile and hardware segment. Smartphones aren’t the key growth driver for the business any longer and management knows it.
According to Radicati Group, a market research firm, the mobile device management market (BlackBerry’s software division) is expected to more than quadruple to $5.75 billion by 2018. BlackBerry is the current leader in the MDM space, with about 14.4% market share according to IDC. CEO John Chen recently said that the company is already “on the path of doubling our software revenue in the next year”.
By shedding its biggest money losing segment for a better price, BlackBerry is positioning itself to pull itself out of the grave.
Can BlackBerry pull it off?
Only time will tell if adopting Android will revive the company’s market share in smartphones. For BlackBerry, success may be needed to keep the company running in the long-term. With nearly 20% of shares currently shorted however, there are more than a few investors who doubt a revival.
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Fool contributor Ryan Vanzo has no positions in any of the stocks mentioned in this article.