It’s been just over one month since the BlackBerry board of directors announced the formation of a special committee to look at strategic alternatives. Today I thought I’d give a bit of an update on my thinking around the topic.
First, I want to remind you all that the supposed mandate of this special committee is to “accelerate BlackBerry 10 deployment”, to quote the press release. Unless they have a drastically different definition of BlackBerry 10, it seems to me that this goal has to involve increasing sales of actual hardware.
Over the last couple of weeks I’ve been increasingly concerned the company was preparing to exit the smartphone market (OS, hardware, etc) and refocus on BBM and enterprise mobile device management (MDM). These concerns were temporarily amplified when rumours hit regarding a “gutting” of the US sales force. Of course we pushed for the company to clarify these rumourss. It turns out they were simply moving the US sales team to the US, rather than having most of them based out of Canada. We knew this had been a work in progress, and obviously whoever leaked the story of the cuts didn’t understand this. On top of this, the company just officially announced the Z30. Moving your US sales force to the US and releasing new hardware are not very good indicators that BlackBerry is about to exit the business, would you not agree?
This tells me that the Board, rightly or wrongly, really isn’t interested in selling the company for parts. They way it looks to me, this company either gets sold entirely in one piece, or it takes on a partner.
My guess is the latter option is much more likely. What I think BlackBerry needs here is a strong company to stand beside it. Not so much for consumer brand recognition, but for balance sheet strength and public confidence. When I say “public” I mean enterprise, consumer and developer confidence.
I think BlackBerry’s best option here is to take on an equity partner. They need a company like IBM, Oracle or Cisco to make an investment in them. This would strengthen BlackBerry’s balance sheet and show the world that they aren’t going anywhere. Yes, I know the company has $3.1 billion in cash and investments as of last quarter. But they’ve acknowledged the need to invest here, and they could easily burn through lots of cash as high margin service revenues decline and marketing spending grows.
Make no mistake, they have an enormous problem that needs fixing with respect to public perception. I just got off the phone with a friend of mine who I’d best describe as a guy who uses technology only because he has to. When his Curve broke last year the sales guy in the mobile store sold him a Samsung. Today he said to me, “Man, I just want my BlackBerry back, but those guys are going under, aren’t they?”
There are hundreds of millions of people who don’t know much about business and finance. They read a headline here and there, and they believe BlackBerry is being sold, going bankrupt, disappearing off the planet, or whatever other combination of BAD you can possibly think of.
Give the world a headline like “IBM Invests $2 billion in BlackBerry” and I’m betting the general public won’t think the company is disappearing anytime soon. Enterprise customers and developers, who generally follow the industry more closely, will be even more convinced of the company’s staying power.
I can see how a company like IBM might be interested in BlackBerry also. Remember that IBM used to be very strong in groupware with Lotus Domino. But Microsoft ended up winning with Exchange Server. Now that mobile communication is taking over the world perhaps IBM might see an investment in BlackBerry as way to enter the MDM market, and possibly improve BBM by adding an enterprise option onto it. Frankly I’m shocked that BlackBerry hasn’t already created an enterprise-grade BBM. It’s a total no brainer.
Some of our contacts have also reached out to us lately to express their belief that BlackBerry isn’t doing a good job of managing its enterprise business. MDM competitor AirWatch also shares this view, clearly. This leads us to the possibility that management help from an IBM or Cisco could help improve things.
I can’t say that an equity investment by a big company would solve all of BlackBerry’s problems. It won’t. But it could go a long way to solving one of the most important problems, and that is public image. This is the option that seems to line up best with what the special committee says is its mandate.