BlackBerry – Hero to zero

BlackBerry’s revenues per user are falling off a cliff.

• BlackBerry is doing everything it can to preserve its user base but in doing so is killing its own handset business and its service business.
• Indonesia is a prime example, which is one of BlackBerry’s most important markets.
• Use of BBM has been very popular here as it has been seen as a way to easily and securely communicate without anyone looking over your shoulder.
• However, this has been a view that is largely held by the older generation with younger users more comfortable in using alternatives such as WhatApp, LINE and so on.
• Hence, BBM has been more commonly used to communicate up and down the generations with the youth segment using other things with each other.
• While BBM was only available on BlackBerry devices, people would still buy the devices despite their low specification and awful user experience.
• Now that BBM is available on iOS and Android that need has evaporated and where BlackBerry was seeing revenues of $100 per device purchase, it will now see zero.
• There is already evidence of this BlackBerry’s share of the Indonesian smartphone market has fallen to 20% in Q3 2013 from 50% a year earlier and is likely to fall much further.
• Local handset makers are already seeing some success in creating very cheap, QWERTY based Android products that ship with BBM installed.
• To me, this is the nail in the coffin for the BlackBerry hardware business and the sooner that the new team shuts this down, the better.
• The problem is that BlackBerry currently has no real way of monetising BBM and as BlackBerry device share continues to collapse, both hardware and service revenues will go with it.
• To make matters worse, BBM is an also-ran in the global chat market as the big players have 4 to 8 times as many users and some are already monetising.
• Hence the only value that remains in BlackBerry is the patent portfolio (RFM valuation $1bn), the service business (RFM valuation $500m) and BBM (RFM valuation $200m) (see here).
• This gives a share valuation of $6.32, in the best instance, leaving me with no enthusiasm whatsoever for the recovery story.