BlackBerry, once hailed as a workplace essential but later relegated to just being a Qwerty keyboarder, is diversifying from its smartphone business to provide enterprise solutions in a bid to cut losses—and banking on Android’s popularity for future growth
CANADIAN FIRM BlackBerry, which diversified from being a smartphone manufacturer to an enterprise solutions provider to cut losses, is pinning its hopes on the proliferation of Android-based phones in the fast-growing Indian market for future growth.
Over the past 18 months or so, there has been a massive proliferation of Google’s Android-based smartphones in the Indian market, with multiple new launches every month at several price points. This has led to the emergence of several home-grown handset makers like Micromax, Karbonn and Lava, and Chinese manufacturers like Xiaomi, which are doing brisk business in India.
Though these companies are giving global conglomerates like Samsung and Sony a run for their money in India, BlackBerry perceives this as an opportunity rather than a threat.
BlackBerry is banking on the widespread adoption of the BYOD (bring your own device) concept in India to drive revenues in the country. BYOD entails employees bringing their own phones and tablets to the workspace, and using them for personal and professional use simultaneously.
BlackBerry’s earlier generation of enterprise solutions—which aims to facilitate secure and seamless telecommunications within an organisation—was restricted to its own operating system and smartphones. But the new generation of solutions is being customised for different platforms like Android, iOS and Windows, and will be rolled out in India soon.
Sunil Lalvani, BlackBerry India’s managing director, explains that an important pillar of BlackBerry’s revenue stream in India was ‘BBM Protect’, a version of the BlackBerry Messenger, an Internet-based messaging service meant to transmit secure information over an enterprise server. While earlier only employees of organisations using BlackBerry handsets could use BBM Protect, now, the enterprise solution, meant to prevent misuse of official data, will be available across Android, iOS and Windows phones by the end of the year.
“As more Android and other devices proliferate the ecosystem, there is a greater opportunity for us to sell our software and services since those many smartphones come into the workspace and their vulnerabilities are exposed,” Lalvani said in an interview. “Our strategy has shifted as well and we are talking to companies that allow employees to bring their own devices to work, and asking them to let us be their preferred vendor to secure these handsets.”
BlackBerry had made the standard BBM service available for phones other than its own in February.
“In India, most professionals connected to the enterprise servers were only using email and calendar. Today, they also use various other services like sales-related applications, and post management and approval-related applications,” says Anshul Gupta, principal analyst (consumer device), Gartner. “Smart devices need to be managed in a corporate environment as personal computers are. It is a market opportunity that is still building up in India and although there are a lot of players, the vertical offers a lot of opportunities for BlackBerry,” Gupta adds.
With a lot of handset manufacturers adopting the open-source Android operating system for their offerings, the market for players like BlackBerry and Nokia has considerably shrunk, leading to financial trouble for these companies. Android-based phones are cheaper and allow users to do more.
Nokia was unable to turn around its fortunes even after it ditched its own operating system Symbian and migrated to Windows for smartphones. It had to eventually sell out to Microsoft, which acquired it in April for $7.2 billion.
But BlackBerry, with its strategy of repositioning itself as a provider of the telecommunication needs of enterprises, is managing to stay afloat for now and is also showing signs of narrowing its losses in fiscal 2015. Interestingly, the company’s narrowed losses in the September quarter, for which it recently announced earnings, was also largely driven by cost-cutting and asset sales.
BlackBerry’s chief executive John Chen, who assumed the top job in November 2013, hopes to see the company return to profitability by 2016, driven by the company’s enterprise and software business. Chen acknowledges the importance of India in his turnaround plan for the company, and it isn’t hard to imagine why.
While the parent company has been grappling with losses, BlackBerry India has managed to remain profitable, although profits narrowed in fiscal 2014 compared to a year earlier. As per BlackBerry India’s latest filings with the Registrars of Companies (RoC), it reported a net profit of R11.46 crore in FY2014 on a turnover of R142.05 crore. Its net profit and revenues nearly halved compared to the year ago.
But between FY2011 and FY2013, BlackBerry India’s revenues grew around 67% and profitability rose around 72%. In comparison, BlackBerry’s global revenues in FY2014 stood at $6.8 billion and it incurred a net loss of $5.8 billion.
However, in the first two quarters of fiscal 2015, BlackBerry has been beating analyst estimates as far as earnings are concerned, posting lower-than-estimated losses.
With over half of BlackBerry’s revenues coming from the enterprise and software businesses, the company is also looking to bring intellectual property acquired from global acquisitions to India to further the BYOD concept. For instance, BlackBerry acquired a London-based company, Movirtu, which owns the technology to allow virtual identity solutions for mobile operators, which allows multiple numbers to be active on a single SIM.
This will enable employees to switch between personal and professional user profiles on the same device, ensuring data security for the organisation. It will also lead to cost efficiencies for companies, Lalvani points out, as it can identify and compensate employees for official usage of their phones only.
It also makes sense for BlackBerry to engage with users who do not own phones manufactured by the company since BlackBerry’s phone sales have been declining and it doesn’t want to compete with cheap smartphones that sell for as low as R7,000. BlackBerry recently launched a premium smartphone called ‘Passport’ in India, which combines a touchscreen and a keypad.
As per International Data Corporation (IDC) data, in the second quarter of 2014, BlackBerry had a 0.5% share of the market, while Android phones had an almost 85% market share.
Lalvani says BlackBerry isn’t willing to sell phones at those prices since it doesn’t want to compromise the experience of using its flagship BB10 operating system. “It is not worth going after this segment, where competition is cut-throat and margins are eroded,” Lalvani says. “Our approach is to sell more software licences to Android users, generate revenues from them and, on the other hand, target users who value the Qwerty experience (phones with a Qwerty keypad).”