Can Microsoft’s Mobile Strategy Save BlackBerry?

BBRY needs to build on its strength and get on other devices

   

So much for the first half of 2013, BlackBerry (BBRY).

A major earnings miss reported this morning sent BBRY shares down 25%, erasing all of the stock’s year-to-date gains and more. Should Friday’s midday trading hold out by the close, shares will have ended the quarter 9% in the red for 2013. Specifically, BlackBerry reported a loss of 13 cents per share — well below expectations of a 7-cent gain.

This was supposed to be the quarter when Q10 and Z10 smartphone sales proved the company could make a comeback in the iPhone era. But lack of precise sales numbers on which phones use BB10, combined with the earnings miss, suggested that a resurgence wasn’t around the corner.

BlackBerry isn’t the only company struggling to maintain a mobile operating system. Microsoft (MSFT) has been battling it out with the Canadian tech company for a distant third-place finish behind Apple’s (AAPL) iOS and Google’s (GOOG) Android OS. While Windows Phones increased their market share by 52% this year, the devices still account for less than 5% of the overall market. (And BlackBerry tumbled below 1%.)

To really move up the charts, those companies would have to overcome Apple’s tech geek favor and the sheer proliferation of Samsung (SSNLF) devices. So far, Microsoft hasn’t proved that it can clear those hurdles, and BlackBerry is moving quickly in the opposite direction. But that doesn’t mean mobile is a wasteland for those companies.

The Gaming Angle

Earlier this week, game development company Klab announced a mobile version of Microsoft’s historical strategy game Age of Empires. In addition to Windows Phones, the game will be released for iOS and Android. It’s actually a very smart way of staying relevant in the mobile industry.

So far, we can only speculate about Microsoft’s grander plans for mobile gaming, but this first move seems pretty telling. Mobile gaming is enormous right now, much to Nintendo’s (NTDOY) chagrin. The industry is expected to earn $11.4 billion next year, and as smartphones continue to make their way into the hands of consumers, that number will only increase.

Microsoft made a smart move when it announced Halo: Spartan Assault at the beginning of the month. The Halo franchise has been one of Microsoft Games’ most profitable properties on the Xbox and Xbox 360, and this installment will bring the franchise to mobile devices for the first time. Less wise was the company’s decision to make the game exclusive to Windows 8 and Windows Phone 8 … but it’s a step in the right direction.

PC sales are plummeting, and Microsoft needs to expand its reach. Despite the increase in market share, Windows Phones haven’t seen a lot of success. Microsoft’s Xbox 360, on the other hand, has done quite well (as the top-selling console for 29 months), so the move into gaming makes sense.

If you’re struggling in a particular area, why not build on your strengths in a way that sneaks your product onto other devices?

Why not indeed, Blackberry.

Secure Work Space

BlackBerry’s position is similar to Microsoft’s, only far worse. Smartphones are BBRY’s core business, so success is critical, and failures are worrisome. And after this morning’s earnings report, investor confidence seems reminiscent of a couple years ago.

So, if BlackBerry can’t win back customers with its devices, it had better hope that it can play to its old strength — enterprise.

Mobile devices continue to be both a gift and a curse to corporate IT departments: They give employees the ability to work and access data just about anywhere, but they’re much more difficult to manage and secure than old-fashioned desktop PCs. And for years, BlackBerry was a corporate darling because of how easy it was to manage and secure — the Department of Defense only dropped BlackBerry devices for iPhones late last year.

But BlackBerry made an announcement earlier this week that could be the key to its future: The company’s Secure Work Space service is now available for Android and iOS devices. Secure Work Space helps separate users’ work lives from their personal lives by segmenting smartphone data — an in-demand service currently provided by companies like Good Technology or MobileIron.

If BlackBerry can leverage its experience with easy-to-manage devices, enterprise IT departments could flock to the new service. Much like what Microsoft’s doing with games, this gives the company a chance to sneak onto other platforms. And right now, that’s looking like the company’s best bet (or only hope, depending on your level of optimism).

Bottom Line

Microsoft’s business is diverse enough to survive losing the OS war, so a push into mobile gaming is an OK risk to make to get into a growing industry. Blackberry, on the other hand, seems to be caught in a swirling vortex of doom. The company needs hits, and quick. Secure Work Space has to be the next must-have feature for the workplace.

If not, well … BlackBerry employees might have a lot more time to play Age of Empires.

Adam Benjamin is an Assistant Editor of InvestorPlace. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/2013/06/can-microsofts-mobile-strategy-save-blackberry/.

©2014 InvestorPlace Media, LLC

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