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NEW YORK—At BlackBerry’s second annual Security Summit on July 23 here, the focus was on the company’s push to build and market enterprise mobile security applications and products that allow businesses to maintain the utmost in security in a threat-filled world.
What was striking was the lack of talk about potential new smartphone innovations, any new device models or anything resembling a discussion about BlackBerry phones.
Even Marty Beard, BlackBerry’s chief operating officer, focused only on security software and services and the huge opportunities that exist in the marketplace for the company, which for many years had been seen as the gold standard in enterprise security when it came to mobile devices.
“The size of the opportunity for BlackBerry [in the security space] is why we are so excited,” said Beard. “We have a belief that every enterprise is going to have a platform that is going to secure this explosion of devices” in the Internet of things.
“We’re entering a world where having to manage the perimeter is becoming increasingly important. That is driving a strategic view that [John Chen] has for us as a company and that we are driving toward.”
Not once did he talk about upcoming smartphone innovations or plans that would drive device synergies for the company. That immediately made me wonder whether we are seeing the start of a world in which BlackBerry could exit the profit-thin, ultra-competitive environment of smartphones and focus solely on software for enterprise mobile security.
This idea germinated in March when BlackBerry unveiled its plans at Mobile World Congress for a new BlackBerry Experience Suite that will adapt much of its BlackBerry software to run on Android, iOS and Windows smartphones and tablets as the company looks to broaden its reach into the enterprise even when enterprises are using competing devices. The BlackBerry Experience Suite, expected to be available by the end of 2015, aims to help enterprises and small businesses bring enterprise-class applications to their end users from a trusted partner, such as BlackBerry. It’s a strategy that doesn’t rely on future BlackBerry enterprise-grade smartphones. Did you think you’d ever be reading those words?
During a question-and-answer session at the Security Summit, I asked Beard whether such a scenario is possible.
“We’ve got to focus overall as a company that makes money,” he said. “That is the prime goal,” and the company sees obvious business opportunities when it comes to enterprise mobile security software.
“On the device side, we’ve been very consistent that it’s a very important segment, but that it’s a segment we need to make money on,” said Beard. “It’s not about getting in or out [of the business]. It’s about making money. On the hardware side, we need to be targeted. None of that has changed.”
Later, I asked the same questions to Jeff Holleran, BlackBerry’s vice president of corporate strategy, who seemed adamant that while smartphones didn’t have a large part at the event that they do have a key role in the company.
“I continue to see hardware as a valuable part of the end-to-end story,” said Holleran. “When you start with silicon, it lets you do useful things. I see a huge value in having hardware as an overall part of our portfolio.”
Maybe both Beard and Holleran are right. Maybe I was just fishing for a good story about the possible future of BlackBerry and the idea of BlackBerry dropping smartphones is as crazy as General Motors dropping its Pontiac and Saturn divisions. Oh wait, GM did drop its Pontiac and Saturn divisions.
So I asked Chris Hazelton, an analyst with 451 Research who was also at the event, for his thoughts.
“Even within the next two years, I think there is a chance that BlackBerry would move away from the device business,” Hazelton told eWEEK. In fact, 451 Research has tracked BlackBerry’s acquisitions over the last year and there’s been about $173 million in purchases since July 2014—all of them in software, he said. “The company is definitely spending substantial but limited cash on software. It’s very likely that they will not be a device vendor in two years.”
Why BlackBerry Security Summit Lacked Talk of New Phones
Could BlackBerry take the approach of Nokia, which recently confirmed its plans to once again get back into the smartphone device business (which it sold to Microsoft in 2014) by licensing its designs to others instead of building and marketing the devices themselves?
That could happen, Hazelton, said, but the “challenge there is if that distracts from their brand and from their enterprise security software” business. “They could give someone a shot, even on a temporary basis for two years and then they could get it back if it’s not working out” by licensing it. “They might see a much larger opportunity, though, as a security software provider. The device business is a pretty low-margin business anyway.”
One giant risk of a licensing approach, though, would be if another company didn’t put as much emphasis on security with a future device that is branded a BlackBerry, said Hazelton. “There is a history and pride with BlackBerry’s security capabilities—and their worst nightmare would be a future ‘BlackBerry’ device that is not secure.”
BlackBerry certainly still has an interest in the high-end smartphone market, said Hazelton, especially when it comes to targeting senior managers inside high-end organizations. “The problem is that the BlackBerry brand in the eyes of consumers is just not what it once was. In enterprises, there is still a lot of value,” but most enterprise applications development today involves iOS, he said.
BlackBerry’s fall from dominating the enterprise smartphone market has been swift and stunning. In early 2006, before the first iPhones appeared from Apple, half of all smartphones sold were BlackBerry models. By 2009, though, its share of the global smartphone market was down to 20 percent. The company continues to face growing competition from Apple, Samsung, Google and others.
In the first quarter of 2015, BlackBerry’s worldwide market share fell to 0.3 percent, compared with 78 percent for Android and 18.3 percent for iOS, according to a recent report from IDC. Windows Phone has a 2.7 percent market share.
BlackBerry certainly isn’t tossing in the towel on its smartphones today, but it may only be a matter of time before it starts looking at other options. There are plenty of former typewriter company executives, Western Union telegram office managers and Circuit City electronics store leaders who failed to make needed changes in time, before their firms no longer had a business to be in.