For a company that many thought was slowly dying just a few months ago, Research In Motion Ltd (NASDAQ:BBRY) is been making news lately as it fights back against the corporate grim reaper with the release of its newest series of BlackBerry 10 (BB10) based smartphones. Facing declining market share, stronger handsets from Apple Inc. (NASDAQ:AAPL), and popular Samsung smartphones powered by Google Inc (NASDAQ:GOOG)’s Android operating system, Research In Motion Ltd (NASDAQ:BBRY) will need to put out a first class smartphone and sell millions of units to have a fighting chance in this space. As difficult as this sounds, a comment made by BlackBerry CEO Thorsten Heins during the recent earnings call gives hope to the comeback of this down but not out hardware and services company.
Severity of addiction
Before we get to Heins’ comment, it is important to recognize the various groups BlackBerry is targeting. Based on my research on BlackBerry, Research in Motion, and CrackBerrys, the Research In Motion Ltd (NASDAQ:BBRY) crowd tends to fall into these four general categories.
1. Heavy CrackBerry users: These users adopted a BlackBerry early and never looked back. They have become committed to the brand and have a dependence on it in a way that is almost drug like (hence the name CrackBerry). These users have stuck by BlackBerry, even as it has fallen behind Android and iOS offerings in terms of apps and features, preferring the services BlackBerry offers along with the physical keyboard and security. Considering these people have been with BlackBerry even over the last few years, their next phone purchase is almost certain to be from the BlackBerry brand as well.
2. Easily tempted by CrackBerry: These users like many features of BlackBerrys, but also want the capabilities offered by Android and iOS devices. Many have taken to carrying both a BlackBerry and another smartphone to be able to use the features of each. Others who stick to one phone have moved to another platform, but still want the BlackBerry features considering them a sacrifice when switching platforms. For these people, if BlackBerry offered a phone with the features of similar Android and iOS devices they would be happy to rejoin the CrackBerry group.
3. Quit cold turkey: When the Research In Motion Ltd (NASDAQ:BBRY) technology first came out; Research in Motion defined the latest in smartphone technology with the BlackBerry devices. People who simply wanted the latest in gadgets got BlackBerrys because BlackBerrys were what defined a smartphone. But when Apple Inc. (NASDAQ:AAPL) redefined the smartphone, these people migrated to the iPhone and abandoned BlackBerrys. They had no special attachment to RIM’s services and simply pursued the latest in technology and as a result, have no particular brand loyalty. To win this crowd back, BlackBerry needs to release a smartphone that is simply better than the competition because this group will migrate to the best technology available.
4. Apple / Android addiction: These people gave up CrackBerry but are now dependent on their new platform choice. Clearly a cult has formed around Apple demonstrated by multi-block lines outside Apple stores whenever the next iProduct is going to be released. Android users have also formed a fan base centered around Android powered devices as a whole. Many of these people are now just as committed to their new platform as CrackBerrys are to theirs. Pulling these users over to BlackBerry would require something truly revolutionary on BlackBerry’s part.
However, Apple and Android devices control the vast majority of the smartphone space. Apple is most famous for its iPhone, but sells numerous other products including tablets (iPad and iPad mini), desktop and laptop computers (Macs), and a possible iWatch in the future. Apple stock has been on a slide recently as investors began to question Apple’s dominance and investor fear fed on itself. However, if the company can live up to earnings expectations, the current P/E ratio could make the company attractive as a value stock.
Despite Apple being such a well-known smartphone player, the company’s market share is actually smaller than that of Google Inc (NASDAQ:GOOG) Android devices. Building on agreements between Google and Samsung, the pair has worked together to become the largest smartphone player and has been a real thorn in Apple’s side. Google has managed to avoid the same stock slide as Apple. But this is not surprising since Google’s venture into the smartphone space is just a piece of the larger company. As a widely diversified business, Google is much more than just a smartphone centered company. Clearly there is room for both Apple and Samsung to coexist as people do not all want the same phone. The question is how lucrative is the third place category, and can BlackBerry claim the spot?
We are the 55 percent!
Some have questioned why Research In Motion Ltd (NASDAQ:BBRY) chose to release the full touchscreen Z10 first and the physical keyboard based Q10 later.
The answer is actually quite strategic in nature. Since BlackBerry is slowly losing customers from the easily tempted group described above, they needed to stop this bleeding. To do so they incorporated many features found in Android and iOS devices including the larger touchscreen and a growing app world. By making a phone that fulfills what these people would see in non-BlackBerrys, BlackBerry is able to hold onto this group before any more of them move to other platforms.
But BlackBerry is offering its own unique features as well including Balance, Hub, and the entire gesture basis of operation. Accompanied with the famous security of BlackBerry, the company is even attracting sales from the quit cold turkey group of techies who are searching for the latest and greatest.
The positive news from Research In Motion Ltd (NASDAQ:BBRY) is that fifty-five percent of Q4 Z10 purchases were coming from non-BlackBerry people. This means BlackBerry is successfully connecting with the second and third categories of people listed above and this is critical to the overall success of BlackBerry as a company. To become a major player again, BlackBerry needs to maintain, if not take, market share from Android and iOS. However, BlackBerry has an advantage in that many Android or iOS users are former BlackBerry users who were only willing to give up their BlackBerry because of a lack of features; features that are now available on the Z10. As these people begin to see Z10s in action, they will realize BlackBerry has put out a true rival to Android and iOS products. And to be successful, BlackBerry only needs a fraction of them back.
Q10 and more are coming
While the Z10 was primarily set up to stop the bleeding from categories two and three, the Q10 is designed with the severe CrackBerry addict in mind. With all the features of a Z10, the Q10 adds a physical keyboard for the crowd that loves this aspect of the BlackBerry devices. Many BlackBerry users have put off buying a BlackBerry 10 device because they are waiting for the Q10 to hit stores.
Together, this sets up a positive outlook for the company formally known as RIM. Sales data shows the Z10 is not just pulling for existing BlackBerry users but it is also attracting new customers or at least bringing back former ones. With the Q10 set to debut in less than a month in the United Kingdom and soon after in the United States, Research In Motion Ltd (NASDAQ:BBRY) will finally have two modern devices in circulation; one to sell to existing customers and one to take back former customers. With even more new phones expected after the Q10 debut it will certainly be interesting to see what Heins has up his sleeve at BlackBerry.
The article BlackBerry and the 55 Percent originally appeared on Fool.com and is written by Alexander MacLennan.
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