Month after month, BlackBerry Ltd (BBRY) bulls argued that every update to the company’s mobile operating system was good enough to battle the big boys — Alphabet Inc‘s (GOOG, GOOGL) Android and Apple Inc.‘s (AAPL) iOS.
BlackBerry stock owners argued this notion for years, as BBRY stock fell from a peak of around $230 in 2007 to a low of $6 late last year.
Thankfully, CEO John Chen can see what BBRY bulls could not, and his willingness to admit defeat might just save the company, and lead to massive gains for BlackBerry stock.
BlackBerry Is Embracing Android
As BBRY investors know, BlackBerry launched the Priv late last year, and it was the first time the company launched a handset without its own homegrown operating system. Instead, BBRY incorporated the Android operating system with Priv, thereby giving users more than 200,000 applications, but with all the hardware and service extras that BlackBerry owners have come to expect.
By all accounts, the reception has been terrific for the Priv. Furthermore, Priv sales are only going to get better as BlackBerry launches the device to all four U.S. nationwide carriers and across the globe. As a result of this warm reception, several BlackBerry executives have recently alluded to the fact that it is probably better to stick with Android and scrap BB10.
While the company’s executives are handling the situation more delicately, product management executive Damian Tay has already said that the Priv is BlackBerry’s transition to the Android ecosystem. This follows Chen’s comment back at CES that any new smartphone that launches in 2016 will run Android.
The Move to Android Is Significant
That said, I am sure there will be some BBRY enthusiasts out there who feel that Chen & Co are selling out, adopting a “join the enemy” mentality. However, it is obvious why BlackBerry is making this move, and why it is great for both the company and BBRY stock.
According to Gartner, Android and iOS control nearly 98% of the global smartphone market. Android is by far the leader, with an 84.7% market share. Further, Microsoft Corporation (MSFT) is third in line with a 1.7% market share. Therefore, to say that BlackBerry’s operating system is limited would be a huge understatement. Fact is that users of BB10 and others alike have diminished year after year, and developers do not prioritize applications for BBRY operating systems, often leaving apps in need of updates for extended periods of time.
As a result, BlackBerry’s addressable market goes from nonexistent to being the largest in the smartphone universe. It means that BBRY does not have to worry about a lack of apps, or developers not updating their apps, or convincing iOS and Android users to migrate back to an inferior operating system. Instead, BBRY can now charge a premium for hardware and offer all of the software and services with Android-powered BlackBerry smartphones that made it so popular in the early 2000s.
BlackBerry Stock Is a Must Buy
BBRY stock has fallen 26% this year, and all of it can be attributed to the broader market decline. While BlackBerry stock is certainly a victim of its past, investors must remember that the stock soared from $6 to $9.50 in the fourth quarter of last year following initial Priv sales data.
The Priv single-handedly drove the company’s average selling price on hardware up more than 30% in its most recent quarter, and what’s so impressive is that the Priv was only available at one U.S. nationwide carrier and for just one month in BlackBerry’s last quarter.
When you couple these facts with a cheap BlackBerry stock, additional Android phone launches in 2016, and a larger rollout of the Priv in the months to come, there’s no question that BBRY stock is presenting a great opportunity. This is a company that does not need 50 million, 20 million or even five million Priv sales to be successful. If the company can sell just two million Priv phones at a $700 ASP, its revenue could easily jump 70% higher than the $2 billion in full-year sales that analysts expect, and the margin gains are almost immeasurable when speaking of a successful hardware product.
In other words, BBRY stock has everything to gain by embracing Android, and that’s why Chen & Co are able to see what so many long-term BlackBerry stock owners refused to admit all these years.
As of this writing, Brian Nichols owned BBRY stock.
