Can BlackBerry survive as a services company? I doubt it.

Phil Goldstein

In late June 2012, when BlackBerry (NASDAQ:BBRY) delayed the launch of its BlackBerry 10 platform until early 2013, I wrote that it might be too little, too late. That sentiment seemed to be confirmed on Friday, when BlackBerry said it would cut 4,500 jobs--around 40 percent of its workforce--and post a nearly $1 billion loss for its most recent quarter. Even more dispiritingly, the company signaled it would shift its focus away from the consumer device market. The question now is: Can BlackBerry survive as a services company? I doubt it.

BlackBerry has always prided itself on being an end-to-end solutions provider, a maker of not only software and hardware but also device security and management services that have helped enterprises and governments keep their data secure. The shift underway, which comes as the company's board is still considering selling the firm, indicates that BlackBerry sees its future less as a player in the crowded smartphone market, where its market share continues to dwindle, and more as a services provider. 

However, as with the push toward BlackBerry 10, I fear that shift may also be too little, too late. 

For example, in the mobile device management and security arena, the Wall Street Journal recently reported that numerous firms have swooped in to take business away from BlackBerry, including Good Technology, MobileIron, Airwatch and others. Although BlackBerry in June formally unveiled its Secure Work Space solution, which added support for iOS and Android devices in addition to BlackBerry devices, a BYOD solution provided by BlackBerry is no longer necessary or all that relevant in a bring-your-own-device enterprise market, since BlackBerry is just one of many vendors catering to that market.

The irony is that the BYOD trend helped hasten BlackBerry's demise in the smartphone hardware market, and now it is likely going to slow BlackBerry's attempts to transition into a services company.

And what about BlackBerry Messenger, the company's highly touted messaging service? Put aside the fact that BlackBerry halted the launch of its cross-platform BBM for Google's Android and Apple's iOS after an unreleased version of the Android app leaked online. BBM thrives on the community that is BlackBerry users. If customers are not buying BlackBerry 10 smartphones--as the inventory charge of $930 million to $960 million the company will book seems to indicate--then carriers and consumers do not see much of a future in BlackBerry as a platform. So what good is having BBM if there is no future for the BlackBerry smartphone platform? Android and iOS users will likely continue to use iMessage, WhatsApp and other similar services.

Large individual BlackBerry shareholders such as Prem Watsa and co-founder Mike Lazaridis reportedly seem to be engaged in a campaign to convince private equity players and pension funds to help take the company private. Although such a move would shield BlackBerry from the pressure of public investors, it wouldn't turn around the company's business.

BlackBerry 10 was a last-ditch effort to remake a pioneer, and it has largely failed. BlackBerry now may try to reinvent itself as a services company, but it likely will not find much of a market for its services. In the end, BlackBerry may be pulled apart for its patent portfolio, which would be a sad ending for the company, and for employees and citizens in Waterloo, Ont. It would also have precedent: Canada's Nortel Networks was sold off in pieces several years ago, just as Nokia's (NYSE:NOK) business is being broken apart today.

I wrote back in April 2010 that both Nokia and BlackBerry were falling behind. It is sometimes the nature of pioneers to think that the advantages that helped them achieve their leading positions will always be there. Companies that build successful business models using one set of assumptions tend to ignore upstarts and trends that run counter those assumptions, and thus wind up writing their own obituaries.

Yet that is the nature of the capitalist world--the "creative destruction" that economist Joseph Schumpeter hailed. It breathes life into new business, new models and new ideas. The downside is that is also destroys old ones, which is what we're seeing with BlackBerry today.--Phil

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