BlackBerry

BlackBerry should stick to low-end phones says Analyst in open letter

It appears to be the season of Open Letters, so Wedge Partners analyst Brian Blair decided to write an open letter to BlackBerry CEO John Chen. Blair believes that BlackBerry would be best served by forgetting about the high-end smartphone market and sticking to the low-end. He adds that the Canadian OEM can use its highly regarded physical QWERTY as a differentiator.

Blair points out that the low end is where the growth is at, and looking at how well the entry-level Nokia Lumia 520 and Nokia Lumia 521 did this year, there might be some truth to that comment. The Lumia 520 became the best selling Windows Phone handset in 2013, and the analyst sees BlackBerry successfully selling over 100 million units if it follows his plan.

So what is the plan? Blair wants BlackBerry to stop producing high-end and even mid-range devices, and focus on manufacturing low-end phones for the emerging markets.

The analyst also notes in his open letter that BlackBerry should give up trying to compete with its software. There are three big tech giants in Apple (iOS), Google (Android) and Microsoft (Windows Phone), each one able to throw unlimited amounts of money into OS development. BlackBerry needs to give up a battle it cannot win and to prove this, Blair points out that BlackBerry has been unable to attract enough developers to produce enough apps for BlackBerry World. That alone should be a signal that it is time for a change.

As a suggestion, Blair says that BlackBerry should offer BlackBerry 10 models priced at $99-$199 without a subsidy. Aiming for a 25% gross margin at that price, the analyst suggests that BlackBerry combine the QWERY-equipped BlackBerry Q5 with the futuristic looking Porsche Design BlackBerry P’9982.

In his open letter, Blair says that, “the BlackBerry 10 OS in a $149 sleek Porsche-designed Q5-like device could be your 2014 breakthrough.” He would like to see BlackBerry stick to offering the top 25 apps around the world and pay to get them developed if necessary.

Blair thinks that if BlackBerry heads in this direction, it should focus on carriers in emerging markets where smartphone penetration is low. He sees areas like Latin America, India and Southeast Asia perfect for his plan. Offering the popular BlackBerry QWERTY on such a low-end model will really help sell the device to the featurephone buyer who wants to buy a smartphone to experience apps like Twitter, Instagram, Snapchat, Netflix, YouTube and more. As Blair puts it,

“This is where you come in and where the keyboard can be a huge plus. All some people want is access to the most popular apps and the feel of tactile keys.”

“The fact is, you have no choice but to move to where the growth is and where the playing field is more level and the chances for success are on your side. Remember there are plenty of examples of companies who survive and even thrive by getting this lower-end approach right. Your biggest challenge if you move in this direction will be doing it proudly and profitably.”-Brian Blair, analyst, Wedge Partners

Blair closes out the letter by suggesting that BlackBerry push BBM more and develop apps focused on emerging markets. To those who would point out that BlackBerry would be receiving less revenue per unit sold if it were to follow his game plan, the analyst says that this is the direction that the company is headed in anyway, even if it sticks with high-end models. Selling entry-level phones will allow BlackBerry to make it up in volume. The question is whether a company like BlackBerry, which has a history that it is immensely proud of, can move to the low-end of the smartphone market without feeling like a failure.

What do you think?
You can read the complete open letter  here.[signoff predefined=”Enjoy this?” icon=”icon-users”][/signoff]

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