Research In Motion Ltd (BBRY)’s Future

A software focus

Analyst opinions are mixed. According to ex-Apple CEO John Scully (via Bloomberg), BlackBerry’s “clock is running out,” but the company can still “come back if they drop hardware and focus on secure messaging.” It is true that in its latest conference call, many of BlackBerry’s most promising growth opportunities appeared to be from the software side of things, not hardware.

Aside from the eventual adoption of BlackBerry Messenger (BBM) on Apple Inc. (NASDAQ:AAPL) iPhones and Google Inc (NASDAQ:GOOG) Android-operated smartphones, the company is rolling out a capability called Secure Work Space for its BlackBerry Enterprise Services 10 (BES 10) platform.

Like the eventual goal of BBM, this feature allows BES 10’s mobile security to be installed on non-BlackBerry devices by corporate IT managers. Heins himself says it “gives us the opportunity to leverage our product capabilities and revenue opportunities across competing platforms.” The number of companies with BES 10 increased by 50% from May to late-June, and rests at 18,000.

Unfortunately, Research In Motion Ltd (NASDAQ:BBRY) does not report margins by segment, so we can’t say for sure exactly how much the company would benefit by dropping hardware altogether to concentrate on BBM, BES 10 and future software ventures. Still, the general consensus is that by focusing on software, BlackBerry could boost its margins—which rest near 34% on a gross basis—significantly. Nokia’s gross margin is near 29%, while Google’s rests at 57.4%. It’s not unreasonable to think that a software-exclusive BlackBerry could see gross margins double, à la Oracle Corporation (NASDAQ:ORCL) or Adobe.

Final thoughts

In short, there are a lot of “ifs” for Research In Motion Ltd (NASDAQ:BBRY) at the moment. If it can follow John Scully’s vision, it seems inevitable that profitability could increase, which in the tech world, is all that investors would need to see before buying in. We’d be watching the company closely, but it’s unlikely that we’ll hear any developments until its next quarterly earnings call in September. Check back here for updates on this situation.

Disclosure: none