No investor should been counting on handsets to drive shares of BlackBerry Ltd. (BBRY), but news that Facebook Inc (FB) is dropping support for its devices means it may be time for BBRY to drop its proprietary OS.
It’s probably fair to say that smartphones are social media machines. With something like 1.6 billion active monthly users, Facebook is the biggest of them all.
Maybe enterprise users won’t care that much. BlackBerry certainly hopes so. Although it’s got to alienate at least some BlackBerry 10 users.
On the plus side, it’s not like the move is a complete surprise. WhatsApp, a communications app owned by Facebook, dropped support for BlackBerry 10 at the end of February. Here’s the kicker from the announcement:
“If you use one of these affected mobile devices, we recommend upgrading to a newer Android, iPhone, or Windows Phone before the end of 2016 to continue using WhatsApp.”
Ouch. BBRY handsets don’t have the capabilities to keep up with development of these apps, and it’s uneconomic to do so anyway. Now that Facebook and its WhatsApp business have made this move, it’s natural to expect other developers to follow suit. Losing the Facebook app might not matter — BlackBerry 10 users can install the Android version — but what happens if other apps drop out?
Hardly a Disaster for BBRY Stock
So what does this all mean for BBRY stock? It’s certainly not good, as the market will tell you. Shares in BlackBerry fell as much as 2.8% within the first 30 minutes of the trading session.
Fair enough. BlackBerry’s OS looks like it could be finished as a smartphone platform. At the least, it’s another nail in the coffin. Few developers bothered writing apps for it even before Facebook called it quits.
And yet, it shouldn’t be that big a deal for BBRY stock. It’s been clear that BlackBerry’s OS was withering away. The company isn’t embracing Android without reason. And as suspect as the market’s knee-jerk reactions may be, a drop of less than 3% — and subsequent recovery — is hardly a signal of imminent disaster.
Besides, BlackBerry’s goal for handset segment is only to stanch its losses. The company is getting by even as it weighs on results. And get this: It showed progress in fiscal Q3 thanks to its Priv smartphone, which is powered by — you guessed it — Android.
Importantly, a bet on BlackBerry stock was more of a bet on software services for corporate customers anyway. The handsets may be out of fashion, but enterprise users will always be interested in security.
If you were bullish on this turnaround story before Wednesday, not much has changed.
Just remember this maxim from Warren Buffett: the problem with most turnarounds is that they don’t turn.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
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