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Why BlackBerry Ltd. Has to Let BB10 Die

Among all the problems that BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) has, the ongoing question of what to make of BB10 is, without a doubt, one of the most problematic.

BB10 is the proprietary operating system that BlackBerry developed for smartphones several years ago which was built on top of the ultra-secure and scalable QNX system. In principle, the BB10-QNX combination was a masterstroke. BlackBerry was finally able to compete with the likes of iOS and Android with a modern, fluid operating system that was just as scalable and arguably more ahead of the competition in terms of security and features.

So, what went wrong, and why does the plug need to be pulled on BB10?

BB10 was great, and I can tell you that personally as a long-time user of the platform. The problem was adoption and ecosystem. Users and developers alike were already entrenched in the other two major operating systems to allow a third option to thrive. This led to lacklustre support from large companies, third-rate application commitment on the part of developers, and anemic sales from both consumer and enterprise clients. In short, it was too late to the smartphone party.

BlackBerry acknowledged this and has since adopted the Android operating system for all devices moving forward. It even licensed new hardware units to be built and distributed by third-party partners. The problem is that BlackBerry refuses to let go of the past.

Devices running BB10 no longer register on most traffic reports, effectively reduced to a rounding error. The release of Android devices running the BlackBerry productivity suite of applications as well as both a hardened kernel and monthly security updates has effectively removed the need for BB10 altogether.

BlackBerry no longer has the resources dedicated to resolving issues or pushing out new updates to the BB10 operating system — the last major update to 10.3.2 was over two years ago, and the long-awaited 10.3.3 release was finally released in the past two months, but it has been riddled with errors.

BlackBerry needs to refocus

One of the things I particularly admire about CEO John Chen is how he took a fragmented and disoriented BlackBerry and put focus on the core products and services the company can deliver. An emphasis on software, security, and renewing the enterprise business was prioritized over chasing consumer features and compelling device sales.

That same focus is what is needed now. BlackBerry needs to focus on what the company has to offer, which is actually quite impressive and could be a major driver of revenue for the company for years to come.

The new BlackBerry

One of the things BlackBerry has been quietly working on involves the automotive industry. A growing trend in the automotive sector is the expansion of the infotainment system. With the advent of GPS systems, Wi-Fi hotspots, traffic and weather alerts, and music streaming, to name just a few, there is a growing number of systems that are linking into the infotainment system.

Surprisingly, nearly 50% of infotainment systems on the market rely on BlackBerry; 250 automakers and millions of vehicles are running software from BlackBerry and have been running that software for years. That software is QNX. BlackBerry is actively expanding work in that segment, which is slowly becoming an increasingly larger part of what BlackBerry does.

Does this make BlackBerry a good investment?

QNX is already in a host of industries, ranging from the medical field and nuclear power facilities to use in the aerospace and space industries. BlackBerry is also known and trusted in the realm of security. Semi and fully autonomous cars are widely regarded as the next evolutionary platform after PC and mobile, and BlackBerry is well positioned to capitalize from that growth.

While year-to-date BlackBerry has edged upwards a little over 2%, the stock is still fairly volatile. Most investors still view the company as a smartphone manufacturer; they point to phone shipments and decreasing sales figures rather than the investment into the automotive sector and the wins emerging from it.

BlackBerry is well placed to be a great long-term investment, but for the moment the stock may be too risky for most.


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Fool contributor Demetris Afxentiou has no position in any stocks mentioned.

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