Wednesday, just two days ahead of BlackBerry’s Friday morning third quarter earnings announcement, CEO John Chen unveiled the company’s latest handset. Under Chen’s leadership BlackBerry has gotten its loses under control, now the company just needs to start making money again. Here are 3 reasons why BlackBerry could turn things around next year.
1. The company has two new phones, and they’re highly differentiated.
BlackBerry’s newest phone, the Classic, is nothing like the Passport which the company launched 3 months ago. The Passport is a funky modern phablet; it’s huge and unwieldy, displays a unique square screen, and it merges a digital touch-screen with a physical keyboard.
As the name suggests the Classic is a throwback to a bygone era. It’s smaller and features a full QWERTY keyboard for users who prefer an old school smartphone interface. The BlackBerry classic also touts 50% better battery life than the 9900, which means it should be a beast for handling email and productivity applications during the work day.
BlackBerry isn’t selling two versions of the same device. These phones are unique to each other and could each capture a portion of their own potential market. BlackBerry has done well to build two phones for two different types of users, they won’t suffer because of money wasted designing two similar phones that cannibalize each other in the marketplace.
2. BlackBerry’s emphasis on security should pay off.
2014 was marked with several high profile hacks. Target, Home Depot, eBay, and most recently Sony all had data compromised.
Although gaining access to corporate data bases is more lucrative than individual identity theft, consumers will likely be targeted at an increasing rate going forward. As smartphone users upload their personal and credit card information to power apps like Uber and Apple Pay, crooks will ramp up their efforts to steal to this valuable personal information as well.
Financial institutions and governments never gave up their BlackBerry addiction specifically because of BlackBerry’s superior security. Cyber crime has the world’s attention and BlackBerry’s security emphasis may pay off in a real way if consumers opt for better protected mobile devices.
3. Even if BlackBerry’s new smartphones fail to spark revenue growth, the company is working on software and partnership deals which are tangential to its own device business.
In an interview with CNBC back in November John Chen commented that BlackBerry’s software business is still small at around $250 million per year, but he thinks that number can double over the next year. If all goes according to plan software sales should account for approximately 13% of BlackBerry’s business over the next year if current estimates hold.
If BlackBerry’s software licensing business can double in one year and become a significant portion of BlackBerry’s total revenue, it could be something for investors to get excited about.
Throughout the interview Mr. Chen made his belief clear that BlackBerry needs to expand its ecosystem through strategic partnerships. Even if its new devices are successful the company can’t depend on them exclusively.
4. Discrepancy between expectations of investors and Wall Street
If either one of these new phones catches on, BlackBerry should have an easy time outperforming the low expectations from Wall Street. Over the next 4 quarters the consensus estimate is that sales will drop by 7% on aggregate.
Contributing analysts on Estimize are expecting BlackBerry to get its sales in gear at a quicker pace. Friday the Estimize community is projecting a loss of 3 cents per share and $992 million in revenue. That’s a loss of 3 cents per share fewer than the Wall Street consensus and $64 million (7%) more in revenue.
Looking out to next quarter the Estimize consensus is even more optimistic on BlackBerry’s sales relative to the Wall Street consensus. Estimize contributors are looking for $1.019 billion in revenue while the Street is forecasting $925 million.
Is 2015 the year when BlackBerry finally becomes relevant again on a national stage? There are a few reasons why it might be, but only time will tell.
(Photo Credit: Honou)
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