Monthly Archives: October 2013

Why one should or shouldn’t buy the company BlackBerry?

Finally BlackBerry (BB) has found a taker.

Once the market leader has announced that it reached a tentative agreement for a $4.7 billion buyout by a group led by Fairfax Financial Holdings, its biggest shareholder.

A company that was once valued at $83 billion is now being sold at 80% discount to its book value and just 0.17 times its sales, creating a record of sort. It had put itself out for sale for quite some time before Fairfax decided to make the move – that explains the bargain basement price.

BB that almost pioneered smartphones with its push mail services took off from where Palm left has been brought down all in about 6 years. I consider Apple’s launch of iPhone as the beginning of the end of BB as Apple outsold within a year.

In the flat-world the growth and downfall are on fast-forward.

So what really caused BB’s downfall?

BB blindly continued to be in the business of just mostly making smart mobile phones. Its competitors have or in the process of moving  to ‘Device + Services’ paradigm.  Google is probably moving the other way i.e. from Services to Device (‘Services+Device’).

Apple pioneered this model, for Apple most its consumer products (iPod, iPhone and IPad) are delivery channels of services (apps) developed by its now nearly hundreds of thousands of partners. Having developed really great products Apple knew the only way it could expand its market was by making their products relevant to a very broad range of users. Apple also knew that it will never have the necessary capability or bandwidth to develop those applications. So it decided to create ecosystem consisting of partners (third party developers) now running to several thousands who would develop these “apps’ that Apple would sell in its own store. These partners create apps that make Apple’s devices relevant to a very broad range of users. More the apps become relevant to more users lead to more sales of devices which in turn leads to consumption of more services.

Over the past few years Apple has carefully fine-tuned this strategy so well that for most app developers Apple is the primary target platform.

Exceedingly well crafted and executed strategy in action.

So what goes into making this strategy work? To words, Partners & Ecosystem:

  • Build a really sexy product that people would want to try or would like to be seen with.
  • Build a stable “platform” that can host partner developed applications.
  • Provide all the necessary help (tools) for the partners use the platform to design, develop and test their apps.
  • Work very closely with the partner community.
  • Initiate work with partner community as early as possible to have several apps available for consumers at the time of launch

So it’s the partners that make it all work.

The most recent one on this transformation journey is Microsoft. It has realized that its the only way to survive at least for its consumer products viz. Xbox, Surface and now recently Nokia. For Microsoft with its finger in enterprise market that makes serious amount of cash this journey would be most challenging unless MS decides to spin off its consumer based product and services.

So BB does not have a platform hence it does not have an army of partners who are willing to develop apps on it. So to analyze it from this paradigm BB has not developed anything of real value in the long run.

Makes me wonder why would anyone want to buy BB?

There are several making rounds such as breaking up BB into two one focusing on consumer and the other enterprise business. Selling it along with its patents to a Chinese company planning to enter smart phone market etc.

The question is what trick Prem Watsa, the chief at Fairfax has up his sleeve?

I believe the train has left the station for BB.