BlackBerry Ltd (NASDAQ:BBRY) is a company in transition, and CEO John Chen has made it very clear that the shift is away from hardware and into software and services. On Saturday, the company announced the BlackBerry SecuTablet, a high-security tablet aimed at the government and enterprise customers.
The tablet, which was developed with Samsung Elect Ltd (OTCMKTS:SSNLF) and International Business Machines Corp. (NYSE:IBM) will retail for $2,380, or about the cost of some used 1998 Ford Mustangs.
One of them is a 225-horsepower muscle car with a V8 that can get you across the country in style, the other is a modified Samsung tablet that costs nearly five times more than the original.
Needless to say, I seriously doubt that the BlackBerry SecuTablet will help propel BBRY stock higher. After all, the top brass in the U.S. government haven’t exactly been overly worried about the security of their mobile networks recently.
BBRY stock could definitely use a boost. It’s up just 4% in the last year, far below the 13% return of the S&P 500 (INDEXSP:.INX) over the same period. That said, underperformance is nothing new for BBRY stock; it peaked above $230 a share back in 2007 and has bled out consistently since then.
Success? I’ll Believe it When I See It
When I gauge the potential success of a new product, I look to history, and BBRY has tried tablets before. In 2011 it made a desperate attempt to remain relevant by dropping the PlayBook, aimed at wooing consumers away from Samsung’s tablets and the iconic Apple Inc. (NASDAQ:AAPL) iPad.
Predictably, it failed miserably. BBRY had to write off a few hundred million dollars as its unsellable units gathered dust in a warehouse somewhere.
Admittedly, the SecuTablet isn’t aimed at the consumer like the PlayBook was. BlackBerry is dead to the consumer, hence the incessant BBRY focus on enterprise and government clients. And while BlackBerry isn’t yet a punchline in those markets, eventually BBRY will be destroyed by its far-larger competitors.
Like Samsung, for instance.
Don’t let today’s Samsung-BlackBerry partnership fool you. Though Samsung is allowing BBRY to repurpose its Galaxy S for the SecuTablet, I’m sure it’s not a pro bono agreement. And when it comes to the battle for U.S. government and enterprise customers, Samsung isn’t afraid to send some of its vast resources off to battle — a battle that BlackBerry is losing. The Wall Street Journal details how severely BlackBerry’s been beaten:
“In 2010, BlackBerry had a market share of nearly 70% among business customers in North America, according to IDC. In 2013, that figure had dropped to around 5%, IDC said. Globally, BlackBerry’s business-market share has slipped to around 8% from 31% in 2010, according to IDC.”
And, for a company increasingly focused on software, BlackBerry’s sales figures don’t look good. Software revenue actually fell 10% between fiscal 2013 and fiscal 2014, making up just 3.5% of total overall revenue.
And with 73% of revenues coming from overseas, BBRY stock is also at the mercy of increasingly unfavorable exchange rates as the dollar continues to stubbornly rise.
The only reason BBRY stock — which has seen revenue crater from more than $20 billion in FY 2011 to an expected $3.5 billion in FY 2015 — hasn’t gone to zero is its cash position. With $3.2 billion in the bank, BlackBerry can afford to loiter around for a few years without going under.
But would you rather own a ho-hum turnaround hopeful or a dynamic innovator on the offensive? A BlackBerry SecuTablet or a classic muscle car?
Sign me up for the latter in both cases.
As of this writing John Divine owns shares of AAPL stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
