BlackBerry's surprise announcement about exploring options like finding a buyer or forming a joint venture has one deeply ominous implication. Since it happened just 6 weeks after the supposed mass market model Q5 debuted in Europe and Africa, it implies that the Q5 has been another disappointment. This is a very serious matter indeed, since the more expensive Z10 and Q10 sales disappointed during May quarter. BlackBerry has clearly been unable to find its footing in the rapidly evolving smartphone pricing environment, clinging to its premium heritage far too long. But the company still has one ace in the hole – and on that card rides the entire M&A dream.
The one real asset BlackBerry still possesses is the BlackBerry Messenger, which became a crucially important messaging tool in a variety of emerging markets ranging from Nigeria to Indonesia. BlackBerry has enjoyed the benefits of a powerful network effect in these markets. It still held more than 50% of Nigeria's smartphone market in 2012 and was the leading smartphone brand in Indonesia with a whopping 12 million users last winter. This is BlackBerry's secret weapon: it is better to have massive market share in 5-6 substantial phone markets than have a diluted market share among 50 countries. In countries where its smartphone share has been high, BlackBerry Messenger has been a key messaging system, knitting together the most affluent consumers and forcing upper middle classes to join the bandwagon to become part of the club.
The Android and iOS versions of BBM are probably going to launch within weeks. This might help BBM to suddenly deliver a new growth spurt, spread awareness of BlackBerry brand and tempt consumers to try out new BB devices. But what makes the timing of the BBM cross-platform launch so perilous is the fact that it is happening 18-24 months too late. Rival cross platform apps have spread like wildfire in the past year – and they have done so precisely in the markets where BlackBerry needs to keep a grip on the messaging market.
WeChat is about to hit 400 M downloads globally and over this summer it vaulted to 70 M outside China. Over the last few months, WeChat has suddenly rocketed to the top of the iOS app charts of countries like Nigeria, South Africa and Brazil. These markets used to be the heart of the BBM expansion in 2009-2011. LINE just hit 300 M downloads globally in July. WhatsApp has topped 300 M monthly users – a much tighter metric than downloads.
If only BBM had become cross-platform messaging service at he start of 2012. It would have had a good chance to rocket to 200-300 M users by now. But BlackBerry management tarried for too long and now faces a line-up of global messaging giants as it finally launches BBM for Apple and Google devices.
It is impossible to believe any company would buy BlackBerry before waiting for a couple of months to see how the BBM roll-out succeeds. If the Q5 is flopping right now, any BlackBerry buyer would regard the viability of the BBM service as crucially important. If the BBM does not manage to take off as a cross-platform service, BlackBerry's defining feature of possessing the leading messaging system in 4-6 major countries will erode rapidly. Talk to anyone from South Africa or Indonesia and it becomes painfully obvious that it was the messaging market domination that drove device sales in those markets in 2011-2012. With Android sales exploding across Africa and Asia, BlackBerry simply must maintain BBM as a service that binds majority of smartphone owners into one network. This can only happen if BBM takes off immediately as an Android and iOS app this autumn.
Should you buy BBRY now on M&A hopes? In my view, the gamble is too risky. Too much rides on the success of BBM in a messaging app market that turned hyper-competitive sometime last winter. The possibility of BlackBerry losing its grip on African and Asian messaging markets is now too high – and once that happens, nothing will keep its hardware range competitive.
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