Blackberry – Set for a Turnaround?
Case Code: BSTR479
Case Length: 16 Pages
Pub Date: 2017
Teaching Note: Available
Organization: Blackberry Ltd.
Industry: Mobile Phone Industry
Themes: Business Strategy
Abstract Case Intro 1 Case Intro 2 Excerpts
The Fall of RIM
The 2007 launch of Apple's iPhone brought about a sea change in the global mobile market and spearheaded a chain of events that led to the gradual downfall of RIM. Within a short period of time, Apple's iPhone received an overwhelming response from mobile users the world over. It brought in the era of the consumer focused smartphones on which users could play games, take photographs, watch videos, and do a range of other tasks, which were not possible on Blackberry phones. In the early days, RIM’s top management did not believe the Apple iPhone was much of a threat; they thought that the device had several shortcomings such as a short battery life, minimal security features, and lack of ability to send e-mail (in the early versions). RIM also failed to utilize an opportunity to put up a fight against Apple. In June 2007, Verizon Communications Inc....
Reinvestment of RIM and Entry of John Chen
In mid-2013, Blackberry's market share in the global smartphone market fell to 2.9%, from 4.9% in the previous year. Moreover, in the third quarter of 2013, the company made a net loss of US$ 4.4 billion, or US$ 8.37 a share, on revenue of US$ 1.2 billion. The company then announced that it was looking into various strategic alternatives including the option for sale. However, Blackberry rejected offers from several leading tech companies who expressed interest in acquiring certain parts of the company. Blackberry stated that splitting up the company for sale was not in the best interests of its stakeholders. According to sources, Blackberry's assets (devices, network assets, software, and patents) were so heavily intertwined that they would lose considerable value in case of a company split....
Chen's Strategy for a Turnaround
Chen brought in familiar faces from SAP and Sybase to fill in key executive positions at Blackberry. He claimed that he had a "one-third" strategy for employee management, wherein he hired trusted people from previous companies for a third, promoted another third from within the present company...
Deal with Foxconn
One of the first measures that Chen took was to enter into a deal with Asia-based mobile company Foxconn, to take over the task of design, production, and distribution of Blackberry phones for the next five years. Foxconn was expected to manufacture the new phones at its factories in Indonesia and Mexico. However, the phones manufactured by Foxconn were targeted at developing markets. BlackBerry was expected to design the hardware and software of its costlier phones that were mostly sold in European and North American markets.....
Bringing Back Business Customers
Chen listened to the long neglected core customer segment of Blackberry – the business users – to find out what they liked. According to Chen, the business users of Blackberry belonged to what he called the "regulated industry" that included banks, insurance companies, healthcare, and government entities. Due to their high level security requirements, employees in these industries were expected to stick to their Blackberry devices. Blackberry was the sole Mobile Device Management (MDM) provider that had the 'Authority to Operate' on the networks of US Department of Defense ...
Another key means through which Blackberry wanted to become more relevant in the mobile market and to build its brand value was through the 'Blackberry Messenger' (BBM). BBM was a free service for BlackBerry, Android, and iOS users. Chen wanted to spread the message that one did not need to own a Blackberry handset to become a Blackberry customer and that mobile users could still be customers of Blackberry through BBM. Chen wanted mobile users – irrespective of the OS they were using – to view Blackberry as a provider of secure mobile communications services in the industry. Speaking about the rising popularity of BBM,....
QNX Operating System
Chen believed that the QNX operating system was Blackberry’s most valuable asset with high potential to earn revenues for the company. QNX was an embedded OS that managed and connected climate control, navigation, and other functions in vehicles to the dashboard. One of the most unique aspects of QNX was that if a particular part of the system shut down or froze, the rest continued to operate. That kind of stability was considered to be crucial in certain circumstances, where a system crash could be disastrous.....
Internet of Things (IoT)
Blackberry felt that there was a lot of potential in the area of Internet of Things (IoT) – using the Internet to connect everyday electronic devices. The company announced that it was in the process of developing a new platform that would be a culmination of QNX and BlackBerry’s secure network infrastructure and device lifecycle management....
By late 2014, Blackberry’s share in the global smartphone market had fallen to less than 1%. For fiscal 2015, Blackberry had a loss of US$ 304 million on revenue of US$ 3.3 billion, mainly due to a fall in phone sales, services, and software. However, Blackberry had US$ 3.1 billion in cash and investments. Chen intended to use the money to further fund the turnaround. Most analysts gave Chen the credit for the change of fortunes at the company. They pointed out that the Blackberry stock price had gained 62% from the time Chen began his tenure and specified his turnaround plan...
Exhibit I: Market Share of Blackberry in Global Smartphone Market, As Of 2014
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