Blackberry Ltd (BBRY) Must Continue Making Phones or Die

Blackberry ltd NASDAQ:BBRY

Blackberry Ltd was once the king of the smartphone kingdom until Apple Inc. introduced the iPhone and changed the phone business. The arrival of Apple’s iPhone changed our views on how we should interact with our phones and the functions we would expect the phones to have. The debut of the iPhone marked the debut of a rich app ecosystem that changed phones into consumer electronic products.

Blackberry ltd NASDAQ:BBRY

Blackberry has tried different strategies for getting its head back into the smartphone game but it has all been a futile effort. The firm has launched new initiatives, made strategic acquisitions, it has changed its management, and it hired a turnaround expert to right the ship. However, the fact remains that BlackBerry came late to the consumer-friendly smartphone party and there wasn’t much it could do to catch up with rivals.

Analysts think BlackBerry should stop making phones

A couple of weeks ago, Marcus Papageorgiou, analyst with Macquarie Capital Markets Canada wrote that BlackBerry should consider shutting down its phone business. The analyst thinks that BlackBerry has already missed the boat and that it can never catch up with Apple’s iPhones or the hundreds of different models on the Android ecosystem. He says, “We believe the market would applaud the company exiting the device business…  Exiting the handset business would leave the company with much higher gross margins.”

The analyst also echoed the prevailing sentiment on Wall Street that BlackBerry s should pivot to focusing on software and services.CEO John Chen has maintained that he plans to turn a profit in the device business by September and that he might exit the phone business if profits remain elusive. Papageorgiou also takes a bearish stance on the prospects of the firm. He says, “The ongoing decline of the service business and unsure future for handsets provide strong headwinds for the stock… We would avoid the shares in the mid-term.”

BlackBerry must continue to build phones or die

BlackBerry might never regain its position as the king of the smartphone space and might continue to lag iOS, Android, and even Windows. Nonetheless, exiting the phone business might be a bad move that could spell doom for the firm. To start with, the firm sold about 600K phones last quarter, the number pales in relation to the volume sales of rival phone makers; yet, the 600K unit sales underscores the fact that the firm has a strong reputation with long-standing government agencies and enterprise clients.

Many of the firm’s enterprise clients have unwavering trust in its stable ecosystem, secured servers and networks, and the fact that they could get compatible mobile devices to ride on the secure architecture. The firm is able to sell its software and security services because its focus on security and stability is wired into the hardware of its devices.

Security conscious agencies and businesses know that a BlackBerry device is inherently safer than an iOS or Android device; hence, the firm would lose many clients if it stops making smartphones. The firm can work smart by making sure that it doesn’t carry unnecessary inventory and the firm could stay flexible to build phones to clients’ specs – even if it means building another Android device such as BlackBerry Priv.

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.

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