How is BlackBerry Doing (2015)?
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How is BlackBerry Doing (2015)?

George Liu George Liu

George Liu

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发布日期: 2015年1月21日
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Here we are in 2015. How is Blackberry doing again? Very well, actually. Last time, I wrote about Blackberry’s turnaround strategy, making the comment that “as far as strategy is concerned, BlackBerry is in great form”. Now, half a year later, BlackBerry is well on its way of coming back in the game. Here’re some findings and thoughts:

If we look at Mr. John Chen’s turnaround strategy in phases, we can divide it into the following three stages: Stabilizing (aka surviving), Restructuring/repositioning and Growth generating. In my view, the firm has successfully completed stages 1 and 2, and is currently marching towards stage 3.

Stabilizing

Rescuing an ailing firm is just like saving a traumatic patient, the first order of business is to save the life by stopping the bleeding. In business, this is cash management. No matter how strong a company looks on books, if its cash is running out, it is going to die, period.

Since his arrival at Blackberry, John Chen has successfully taken measures to stop the cash burn there and for the last three quarters, the firm’s cash and investments have been sitting steadily at about $3.1 billion. Its current ratio (the company’s ability to pay short term liabilities) has been improving every single quarter for the last 4 quarters since November 2013. Other quarterly financial ratios exhibit similar positive patterns.

On the profitability side, the firm’s gross margin has improved dramatically from roughly negative 100% to positive 50%, thanks to the containment of the its cost of sales using measures such as the outsourcing of manufacturing through partnering with Foxconn . What’s even more impressive is the successful control of BlackBerry’s operating expenses: the 2015 fiscal year numbers have been axed to half those of 2014!

Restructuring/repositioning

BlackBerry has always been regarded as a smartphone maker by the business community, but not anymore. Now, analysts started to recognize BlackBerry as a software vendor, and then, a device manufacturer. It’s rightly so since BlackBerry’s hardware revenue has now fallen below 50%.

BlackBerry smartphones used to be the start of the solution, or simply was the solution (since they were targeting consumers). Whereas now, increasingly, what we see is BlackBerry devices are part of the solution, i.e. firms purchase thousands of phones alongside signing up for the BlackBerry BES12 EMM system to achieve end to end security.

The buyers are now IT managers instead of consumers. This is a BIG shift. To achieve this repositioning, numerous restructuring measures were taken. Here are some highlights:

  • A series of organizational changes and appointments including the replacement of the consumer-oriented Chief Marketing Officer position with the SVP Marketing role, the hiring of new sales leaders to better direct enterprise sales;
  • The launch of a portfolio of enterprise products including: BES12 – the robust Enterprise Mobility Management platform, BlackBerry Blend – a security-minded employee productivity system that virtually eliminated the need of VPN;

Growth Generating

As Mr. Chen put it, "sustained profit needs to come from growth, it's not coming from cost-cutting", and BlackBerry has been busy preparing itself for the growth forward. Where’s the biggest growth potential in the market? How can BlackBerry leverage its capabilities and expertise of productivity and security to capture these growth opportunities? The answer inevitably falls upon enterprise services and Internet of Things (IoT).

Enterprise services are the whole suite of products and services that cater to businesses’ needs of productivity and security. At the center of the suite, there’s BES12, the Enterprise Mobility Management (EMM) system. On top of that, BlackBerry launched many other solutions including secure messaging service BBM Protected, collaboration tool and productivity booster BBM Meetings, and literally work-anywhere-on-any-device enabler BlackBerry Blend. The EMM market itself is already a fast growing huge market with an annual growth rate of 43%, let alone the potential with other services. To strengthen its core competencies of offering productivity, security oriented products; BlackBerry acquired Secusmart (anti-eavesdropping) and Movirtu (virtual identity) in the past several months.

On the IoT side, things look even more promising. At CES 2015, BlackBerry showcased the fruit born from its NantHealth acquisition – the HBox. This is a QNX-based data device that collects data from connected “medical things”. Combining NantHealth’s expertise in healthcare with BlackBerry’s know-how on device management and secure network, BlackBerry finds the sweet spot to fuel growth in the IoT space (healthcare as a regulated industry specifically), on top of its already strong presence in the auto industry (QNX Infotainment).

To conclude, Mr. Chen not only established a clear and well-founded strategy for BlackBerry, but also carried out solid execution of the strategy to date. Given time, BlackBerry should re-emerge as a strong growth firm specializing in mobile communications.

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