As Expected, BlackBerry Will Be a Smartphone Bloodbath Victim

[crying smartphone user]

If you were surprised by this week’s “stunning” news that once king-of-the-hill smartphone vendor BlackBerry (BRRY) and its shares took another leg down, I have to say you should be reading my investment newsletter PowerTrend Profits. In addition to firing Chief Executive Officer (CEO) Thorsten Heins, BlackBerry also opted for a $1 billion fundraising plan from its largest shareholder rather than $4.7 billion rescue bid.

The way the media is reporting it, it was BlackBerry that opted for the change in terms, but I am more inclined to think it was Fairfax Financial, the company’ s largest shareholder, that altered the terms of the deal.

Here’s why I think that…

Dramatic share loss and big operating losses scare away investors. During the last four years, which were marked by significant market share gains from both Apple (AAPL) and Samsung in the smartphone market, BlackBerry’s share price has fallen from 50% to 3% of the market. Other than those two now-market-share-leading companies, a number of others have attempted to make hay in the smartphone category — LG Electronics, HTC, Motorola Mobility, Sony (SNE), Google (GOOG), Nokia and more. To make matters worse, we’re also seeing several Chinese manufacturers throw their hats into the ring — Huawei, Lenovo and ZTE. The bad news for BlackBerry and others is that these Chinese smartphone manufacturers are gaining market share. According to 3Q 2012 data collected by IDC, behind market share leaders Samsung and Apple were Huawei, Lenovo and LG Electronics.

Robust mobile operating systems from Apple, Google and even Microsoft offer far greater functionality, more apps and many of the features that first led companies and consumers to adopt the BlackBerry. In my view, the writing was on the wall for BlackBerry when federal and other government institutions started allowing iPhones and other smartphone models to be used in place of BlackBerry ones.

Exclusive  Investor Confidence Hits 59% on Eve of Davos Forum

So much like when you do your homework on a company and its shares and you’re less than impressed by what you found out, why would Fairfax Financial put up $4.7 billion of its investors’ money to try and save a company that is losing market share, generating losses and whose recent products have been a disappointment? Plus, BlackBerry lacks a roadmap to take the company into The Connected Car and The Connected Home.

You wouldn’t buy shares in that company, and it comes as little to no surprise that Fairfax Financial wouldn’t do so either.

A takeout seems unlikely as well for BlackBerry. Some professional investors have asked for my view on whether or not BlackBerry is a takeout candidate. My resounding response is “NO.” There is ample hardware manufacturing capacity in Asia, which means next to no one would want BlackBerry’s hardware operation. When it comes to BlackBerry’s BB10 operating system, its install base is waning. As a platform, its app count trails significantly behind those of Apple, Google and Microsoft.

The one jewel to be had in BlackBerry’s portfolio is its security business, but even with that, solutions from other companies — Apple, Samsung, Good Technology and others — are making significant strides. Maybe BlackBerry could sell that part of its business, but that still leaves it holding the money-losing hardware business.

It’s a bloodbath — just like I expected. Subscribers to PowerTrend Profits have heard me dish on what I call The Smartphone Bloodbath for some time now, and it is unfolding almost exactly as I predicted. That’s why I advised my subscribers to “buy the bullets, not the guns” of the smartphone market, and that has us well in the black.

Exclusive  Tuning in to the International Consumer Electronics Show This Week

PowerTalk: Behind the B2B and B2C Communication Revolution with Twilio
Joining me on PowerTalk is Jeff Lawson, CEO and co-founder of Twilio, a company that makes cloud-based telephony tools — voice and messaging — for companies and mobile application developers like Uber, Google (GOOG), Hulu, (CRM), Home Depot (HD), AT&T (T) and others.

With the global explosion of the Internet, smartphones and tablets, we’ve seen a shift in how we can communicate with one another. This includes: instant messaging, mobile messaging, picture messaging, email, messaging through Facebook, Google+, chatting and more recently video calls through Skype, Google and even Apple with its FaceTime app.

While many think these new modes of communication are for personal use — keeping in touch with family, friends and so on — there’s another aspect to them — they can be used for business. That’s right: the Internet and telecommunications technologies are changing the way we connect with companies. That situation has implications for how a company communicates with its customers. It’s not just Twitter and Facebook — a company can interact with customers via voice, messaging or even picture messaging.

In the age of software-defined communication, which is having an impact on the business models of Comcast (CMCSA), AT&T, Verizon (VZ), Cisco (CSCO), Avaya and others, Jeff has been named one of the top VoIP CEOs. To me, that says he’s worth listening to, and as you listen to this edition of PowerTalk, you’ll soon see picking up the phone and talking to someone in a new light.

Exclusive  How Apple’s Success Confirms the Great Man Theory and Say’s Law

Click here to listen to my PowerTalk with
Jeff Lawson, CEO of Twilio

Read my PowerTrend Brief from last week, If You’re Not Investing, Here’s Why You Need to Pay Yourself First. I also invite you to comment in the space below.

Like This Article?
Now Get Mark's FREE Special Report:
3 Dividend Plays with Sky-High Returns

This newly-released report by a top-20 living economist details three investments that are your best bets for income and appreciation for the rest of the year and beyond.

Get Access to the Report, 100% FREE

previous article

J.C. Penney Co. (JCP) heads into the holiday season needing a gift from Ole St. Nick to appease investors.


Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen publishes 4 different investment newsletter advisories, including the award-winning Forecasts & Strategies, which has beaten the market over the last 15 years.

Product Details

  • Forecasts & Strategies
  • Skousen High Income Alert
  • Fast Money Alert
  • Five Star Trader
About Mark Skousen

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays. Bryan's four newsletter and trading services include:

Product Details

  • Cash Machine
  • Premium Income (exclusively for subscribers of Cash Machine)
  • Quick Income Trader
  • Instant Income Trader
About Bryan Perry

Nicholas Vardy

A Stanford and Harvard Law graduate, Nicholas Vardy scours over 40 different global markets every day to uncover new profit opportunities for subscribers. His 3 advisories and trading services include:

Product Details

  • The Alpha Investor Letter
  • Bull Market Alert
  • Alpha Algorithm
About Nicholas Vardy

Doug Fabian

A 30-year Wall Street veteran and famed market timer, Doug Fabian is one the nation's foremost experts on ETFs (Exchange Traded Funds). His two ETF-focused advisories include:

Product Details

  • Successful ETF Investing
  • ETF Trader's Edge
About Doug Fabian

Bob Carlson

In Bob's monthly newsletter, Retirement Watch, he provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details


Used by financial advisors and individual investors all over the world, is the premier provider and one-stop shop for dividend information and research. Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

Product Details