Can Research In Motion Ltd (NASDAQ:BBRY) survive as a service company?
Earlier this week BlackBerry launched its long anticipated Secure Work Space – an addition to BlackBerry Enterprise Server, or BES, which some analysts think could represent the future of the Waterloo firm. But no, BES and services won’t save this troubled company.
The sad decline
Research In Motion Ltd (NASDAQ:BBRY) has plummeted from its once lofty heights atop the smartphone industry. A hubris plagued management team assumed the BlackBerry brand was unassailable to Apple Inc. (NASDAQ:AAPL)’s iOS and Google Inc (NASDAQ:GOOG)’s Android.
But that assumption proved to be wrong. Today, Research In Motion Ltd (NASDAQ:BBRY) has completely lost the consumer market. The company sits in fourth place based on market share lagging behind the struggling Microsoft Corporation (NASDAQ:MSFT) Windows Phone.
In five years, the industry has shifted into a two-player duopoly pushing out second tier platforms.
According to ComScore, iOS holds 39.2% of U.S. market share and accounted for 41.4% of April smartphone sales.
Android has an even bigger lead with 52.0% of U.S. smartphone market share. In China, the world’s largest smartphone market, Android has gobbled up 51.4% of market share. Because Google Inc (NASDAQ:GOOG) licenses out its operating system to manufacturers for free, Android handsets have a significant price advantage.
What’s worse is BlackBerry has lost its edge in the corporate space which represented the company’s last stronghold. According to a report by IDC, enterprises are increasingly switching to iPhone and Android devices as more companies adopt Bring-Your-Own-Device, or BYOD, polices.
Because employees have more choice, they’re increasingly choosing alternative brands. Apple Inc. (NASDAQ:AAPL) has been particularly effective at gaining ground in enterprise. While Research In Motion Ltd (NASDAQ:BBRY)’s installed base remains larger, enterprise iPhone shipments exceeded BlackBerry for the first time ever last year.
A new direction
This isn’t news for BlackBerry. Management is well aware of this trend and is addressing the problem by beefing up its enterprise service offerings.
On Tuesday, the company made a major announcement with the expansion of BES. The new service, called Secure Work Space, allows corporate clients to manage their files on all devices they support including iOS and Android. The move foreshadows a firm that is increasingly focused on services in the face of declining handset market share.
Some analyst think services like BES could represent the future of the company by establishing Research In Motion Ltd (NASDAQ:BBRY) as a leader in mobile device management, or MDM.
In their view, BlackBerry as a mobile operating system and device may decline into oblivion. But the company can survive by becoming a company capable of providing the MDM systems customers need.
Won’t solve BlackBerry’s problems
But MDM won’t save Research In Motion Ltd (NASDAQ:BBRY).
According to Gartner, the MDM market is currently generates $500 million in sales annually with significant growth ahead. That’s fine until you consider that BlackBerry earned nearly $1 billion from services in the last quarter alone. Research In Motion Ltd (NASDAQ:BBRY) would need to corner the MDM market and expand it by a factor of eight just to replace its current annual service revenue.
That point doesn’t even consider profitability. Services were an incredibly lucrative business for BlackBerry when the company was the only enterprise game in town five years ago. But it’s unlikely that the company will be able to generate the same gross margins in the MDM space as there are already a number of large competitors.
In addition, the decision to support iOS and Android devices will only accelerate the company’s declining hardware business.
Foolish bottom line
Research In Motion Ltd (NASDAQ:BBRY)’s Enterprise Server is a great service and has the potential to be a small, hidden catalyst for the stock. But it doesn’t represent the future of the company.
The fate of the Research In Motion Ltd (NASDAQ:BBRY) rests squarely in the hands of BB10.
Robert Baillieul has no position in any stocks mentioned. The Motley Fool recommends Apple Inc. (NASDAQ:AAPL) and Google. The Motley Fool owns shares of Apple and Google Inc (NASDAQ:GOOG).
The article Can Enterprise Server Save Blackberry? originally appeared on Fool.com.
Robert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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