Blackberry Crumble

On Monday Blackberry announced it had provisionally accepted a bid from the Canadian private equity firm Fairfax Financial Holdings worth $9 (U.S.) a share, only 6% of the peak share price recorded in June 2008. Why has Blackberry, a firm with operations in 175 countries, $2.8bn in cash and whose corporate clients amount to 90% of the Fortune 500 been forced to accept such an offer?

Fundamentally, Blackberry misread market trends and did not follow consumer demand. It stood still while competitors HTC, Samsung and most notably Apple reshaped the mobile handset market. Blackberry isn't the only firm which failed to adapt (remember Nokia?) but its decline is swift and coming to a head. So why did Blackberry become so big in the first place?

Blackberry rapidly gained market share by doing two things really well. It had the best security and the best instant messaging system (BBM). This made it the favourite of both governments and corporate IT departments across the globe, whilst also appealing to young people who quickly became attached to BBM. However, Blackberry neglected three key trends in consumer demand.

Firstly, Blackberry ignored the fact that consumers want something fun, not just functional. It dismissed touch screens as unnecessary, not grasping that people found them alluring and  engaging enough to pay for. Blackberry has now brought out some touch screen models, but they have performed poorly and are too little too late. Blackberry continued catering for those few who saw buttons as indispensible while ignoring the direction of the rest of the market.

Secondly, Blackberry handsets are not sufficiently App friendly. Handsets were incapable of hosting Apps as recent as 2009, and even now there is a greatly reduced variety of available Apps. It almost goes without saying that fans of Apps do not buy Blackberry handsets. Again Blackberry found itself forgetting that consumers expect to enjoy using their phones. Ironically, one of the few Apps available on the Blackberry operating system is WhatsApp, an App that has done more than any other to erode the status of BBM as the best instant messaging service.

Thirdly, the recent trend of bring your own device (BYOD) has wrong-footed the Blackberry business model of appealing to IT departments. With employees often deciding which handset they use, security is no longer king in the corporate handset market leaving Blackberry out in the cold.

In summary, Blackberry had a winning formula but refused to adapt the formula in the face of significant trends in demand. Blackberry is now about to be taken into private ownership where it can be reshaped with less public scrutiny. This reshaping is widely predicted to involve turning Blackberry into a niche handset maker for the corporate world, and with large reserves of cash and intellectual property, there is an opportunity here. If Blackberry can adapt to key consumer demand trends, once again the future could be bright.