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BlackBerry (Canada)

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BlackBerry is one of several mobile communications brands to have enjoyed a brief moment in the sun before imploding in the wake of Samsung and Apple's global dominance. Canadian manufacturer Research In Motion (RIM) arguably set the standard for mobile corporate communications during the early 2000s, and by mid-decade its BlackBerry handset had established itself as the preferred mobile communications device for business users. However, from 2009 onwards, BlackBerry's early lead in the smartphone market was gradually undermined, first by Apple's more consumer-friendly iPhone, and then by the emergence of devices powered by Google's Android system. What was at first a slow decline in performance accelerated rapidly from 2011, making RIM's survival as an independent company by no means certain. In 2013, the company announced plans to exit the consumer market in favour of business customers. Somehow it has struggled on since then, despite a continuing fall in its customers. It stopped making handsets inhouse altogether in 2016, licensing out those rights to Chinese company TCL.

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Who handles advertising? Click here for Agency Account Assignments. BlackBerry declared advertising expenses of $102m in fiscal 2016.

Competitors

See Consumer Electronics Index for other companies

Brands & Activities

BlackBerry was originally the main operating brand for the wireless communications developer known as Research In Motion (or RIM). The key to the company's success was its development in the late 1990s of an integrated offering which combined branded hardware, software and superior communications services. RIM not only produced its own range of mobile handsets along similar lines to Nokia or Motorola, but also managed a specialised communications network that linked into the connection provided by traditional carriers such as AT&T or Vodafone as well as users' own corporate networks. BlackBerry Messenger (or BBM) was its at one time widely popular instant messaging (or chat) service.

Another early selling point was the unrivalled security offered by the BlackBerry service, which compresses and encrypts mails so that they cannot be intercepted by unauthorised users. (In 2010, this feature led to the BlackBerry network being forcibly suspended by the government in the United Arab Emirates and some other Middle Eastern countries because of allegations that it was being used by terrorists, and could not be eavesdropped). A more recent innovation was a voice component which connects to corporate phone networks, so that calls to a user's office extension could be automatically rerouted to his or her BlackBerry.

However, a crucial weakness was the company's reliance on its own central network which routes all BlackBerry email through a single channel before feeding it back out to subscribers. During 2008, the company suffered a series of technical blackouts, the worst of which suspended all BlackBerry email services for 10 hours. Even more serious was a power outage in October 2010 which left millions of users worldwide without email service for as long as three days.

Another was the closed-world biosphere in which only BlackBerry-designed software would run on BlackBerry-manufactured devices. This was the first crack in the wall steadily widened by the emergence of Apple's iPhone, which actively encouraged third-party developers to design apps that would work on its devices. It wasn't until 2009, two years after iPhone's launch, that RIM opened up its environment to independent developers with the launch of BlackBerry AppWorld.

Having successfully set the standard for the smartphone market between 2005 and 2009, the emergence of rival high-end devices first from Apple and then from other companies using Android software eroded all of RIM's competitive advantage. Competitors were quick to at first match and then surpass the services offered by BlackBerry. As a result, the brand gradually found itself relegated from market maker to, at first, the company playing catch-up, and then to a business struggling to survive.

In 2007, to broaden its userbase beyond business customers, RIM began launching a number of more compact, consumer-oriented models such as the Blackberry Pearl series, which offered most of the same key connectivity functions but with a smaller screen. In 2008, it joined the mainstream mobile market with its first flip-phone Pearl, instead of the standard tablet design, as well as the BlackBerry Bold, a top-of-the range device which featured the biggest screen of any model to-date. To deflect the growing competition from Apple's iPhone, the group launched its first touchscreen phone, the BlackBerry Storm, at the end of 2008. Sales were not as strong as had been expected.

Yet, despite losing some share to Apple during the earlier part of that year, BlackBerry actually widened its lead in the final quarter, its popularity boosted by the declaration from President Obama of his passion for his own BlackBerry handset. The BlackBerry Torch, in 2010, was the first of a new family of touchscreen devices that could be rotated 90 degrees (like an iPhone) for an even wider landscape image, as well as a slide-out keyboard. It too failed to stem the growing popularity of Apple's device. The company also launched its first tablet device, a rival to Apple's iPad, in March 2011 under the name BlackBerry PlayBook. However, sales were very weak by comparison with iPad, even after a big cut in list price.

The flood of Android-powered devices launched in 2010 onwards were to provide the tipping point for BlackBerry's downfall. According to data from researcher Gartner, BlackBerry had just under 20% of the global smartphone sector by operating system in 2009, placing it #2 behind Nokia's Symbian with 47%. Apple's iOS then had 14% and Android just 4%. The explosion of Android devices over the next two years completely transformed the market. By 4Q 2011, BlackBerry's global share had slipped below 9%, and it had slumped to 4th place behind both Apple (24%) and Symbian (down to under 12%), but also Android, whose share had soared to almost 51%.

The group still maintained a huge global network - the number of subscribers continued to grow until the latter half of 2012, touching 80m by June 2012 - but it was outpaced by the exponential expansion of the market as a whole. Almost all BlackBerry's subscriber growth after 2010 was international, much of it in emerging markets, while the number of subscribers in its core market of the US declined sharply. In fact, the company was accused of blinding itself to the intrinsic failure of its strategy because its international growth obscured collapsing US share.

During 2012, however, the signs were impossible to ignore. By the end of the year, BlackBerry had slipped out of the top five smartphone manufacturers worldwide, and full-year share had slumped to just 4.6%. Handset volumes for the year ending Feb 2013 fell 43% to 28.1m devices, and the group sold 1.1m PlayBook tablets. Total global subscribers slipped back from their mid-2012 high to 76m by Feb 2013.

Though most competitors had by then abandoned their own proprietary operating systems in order to join the Android sector or, as in the case of Nokia, side with Windows instead, BlackBerry refused to follow the crowd. It spent the year finalising its own BlackBerry 10 software, and developing two new handsets, the all-touch Z10 and part-touch part-keyboard Q10. These finally launched in early 2013. However, take-up by customers was minimal. For 2Q 2013, researcher estimated BlackBerry's share of the global smartphone market to have plunged to 2.9%, from 4.9% a year earlier. By the beginning of 2016, US market share was less than 1%.

A few days later, the group announced that it had appointed banks to "explore strategic alternatives", a phrase that implied that the company had put itself up for sale or break-up. In Sept 2013, BlackBerry said it had agreed to be acquired by Fairfax Financial Holdings, already its biggest shareholder, for around $4.7bn. At the same time it announced plans to exit the consumer market in favour of enterprise and "prosumer" customers and cut as much as 40% of employees. It also wrote off a huge charge of $960m against unsold inventory of its Z10 and Q10 devices. However the private buyout fell through in November when Fairfax was unable to raise partner funds to support its own offer. As a result, BlackBerry said it will soldier on alone and attempt to turnaround its slowing performance. For the year to Feb 2014, the scale of the problem facing the company was demonstrated by the fact that, of just 3.4m devices sold in the final quarter, fewer than a third were of the latest, expensively-researched BlackBerry 10 models. Instead they were mostly older BlackBerry 7 handsets, launched in 2012.

Despite the steep decline in its market share, BlackBerry continues to maintain a following. For 2Q 2014, IDC estimated 0.5% share of the global smartphone market, on shipments of 1.5m devices. Another bright spot in the group's performance is the continuing strength of its BBM messaging service, which had grown to 85m active users by the end of March 2014. The service was extended free of charge to the Android and iPhone platforms during the year, and is also being extended to Windows Phone.

For now, BlackBerry soldiers on as an independent company. It has adopted a new strategy focused exclusively on business users rather than the wider market of consumers, and is continuing to push its latest BlackBerry 10 operating system. In 2014 it launched a new handset, the BlackBerry Passport, but the main focus is on development of the company's mobile security technology and software. In 2015, the company launched its first fully Android-based device, the BlackBerry Priv, as well as the BlackBerry Classic, a throwback to its original model, offering a physical keyboard as wel as a touchscreen. The latter device was finally discontinued in 2016 after the US Senate - a key longtime customer - announced a shift away to Samsung and Apple.

At around the same time, CEO John Chen indicated that the hardware business had another year to improve performance or be shut down altogether. Towards the end of the year, the group finally confirmed plans to stop making handsets, and it subsequently issued a global license to Chinese manufacturer TCL for global rights to branded hardware. The first handset under this arrangement, the BlackBerry KeyOne, with an Android operating system, was introduced in 2017.

In 2015, BlackBerry acquired Good Technology, a rival developer of secure mobility solutions, for $417m.

Financials

The group's financial performance over the past few years shows the clear evidence of its meteoric rise and fall. Group revenues peaked in fiscal 2011 (ending Feb 11) at $19.9bn, before falling for the first time, by 7%, to $18.4bn for fiscal 2012. The biggest impact came in the final quarter of the year, when revenues plunged by 25%. However, that was nothing compared to the 60% plunge that followed in ye 2013 (to $11.1bn), and then almost 62% in the year to 2014, to just $6.81bn.

Net income plummeted from $3.41bn in 2011 to $1.16bn for 2012, to a loss of $646m for 2013, and then an eye-watering deficit of $5.87bn for 2014. That figure included a third consecutive year of billion-dollar-plus adjustments for impairment and depreciation. However, the company also reported a loss even at an operating level, with costs of sales slightly higher than revenues.

For ye 2015, revenues more than halved to just $3.34bn, but net losses reduced to $304m. That included a large amortisation charge as well as accounting adjustments. Excluding those items, the company reported a very small profit.

A further decline resulted in revenues of $2.1bn for ye 2016, and yet another net loss of $208m. The US accounted for a third of revenues, or $714m, followed by Canada at $238m. The UK is BlackBerry's biggest international market, but revenues have plunged by two-thirds in two years to just $195m. Handsets contributed just 41% of group revenues in ye 2016, compared to more than 80% four years earlier.

Management

Until the beginning of 2012, Research In Motion's founder Mike Lazaridis remained president and co-CEO of the firm, along with Jim Balsillie. Lazaridis was responsible for product strategy, development and manufacturing; Balsillie supervised the main corporate functions such as business development, marketing, sales and finance. However, the company's growing troubles during 2011 caused several significant changes. In summer 2011, one of RIM's three chief operating officers, Don Morrison, previously COO BlackBerry, resigned as a result of ill-health, and chief marketing officer Keith Pardy also left the business. In January 2012, Lazaridis and Balsillie also both resigned, and were replaced by Thorsten Heins, formerly COO, product & sales. Balsillie resigned as a director in Mar 2012, and several other senior executives also left the business. Lazaridis resigned as a director in March 2013.

New CEO Heins made the decision to press ahead without partnerships and asset sales, and launch a new range of handsets. When these proved unsuccessful, and the buyout deal with Fairfax fell through, Heins left the company, and was replaced by experienced technology specialist John Chen, who became executive chairman & CEO. His appointment led to the departure of the rest of the senior management team soon afterwards, including COO Kristian Tear, CMO Frank Boulben and CFO Brian Bidulka.

Background

BlackBerry is the creation of electronics engineer and self-confessed "technology geek" Mike Lazaridis. As a student in the early 1980s at the University of Waterloo in Ontario, Lazaridis became involved in project work on the side for various computer developers. As a result, he decided in 1984 to quit university before finishing his degree and launched his own company under the name Research In Motion. Initially Lazaridis hired himself out to manufacturers, building computer circuits or improving upon operating systems developed by other researchers. The company's first proprietary product was an easy-to-programme electronic signboard for stores. That led to a commission from General Motors, which in turn led to a contract to develop wireless data systems for the electronic pager division of Canadian company Rogers Communications.

The systems in which Rogers was interested were based around new wireless data technology being developed by Ericsson of Sweden. Building upon what it had learnt from the Rogers contract, RIM designed a tiny radio modem which could be installed in a variety of products ranging from computers to vending machines to transmit data. Significantly, these systems transmitted data via radio packets rather than through cellular communications. This not only allowed for messages to be sent using the optimum efficiency and speed, but also allowed for a permanent connection. The company began to concentrate exclusively on wireless data communications. In the mid-1990s, working with Intel, RIM designed a smart pager which, unlike most existing devices, could send as well as receive messages. It offered a full qwerty keyboard, a small data screen, and a built-in contact manager and scheduler. This was launched commercially in 1997 as the Inter@ctive Pager, latterly by BellSouth, and RIM signed up several major corporate clients, including IBM, which rolled out the device to all its field sales and service representatives in North America.

RIM issued an IPO in 1998, and began to develop an upgraded version of the pager, which could also link into corporate email servers using Microsoft Exchange software. Designed as a mobile email device, this launched in 1999 under the new name of BlackBerry by RIM. The name was chosen initially because an executive at naming consultancy Lexicon thought the letter keys on the device looked like the seeds on a strawberry. The idea of a strawberry seemed too slow, so the name Blackberry was proposed instead. Among the new product's key benefits were the price, at $399 some $200 cheaper than its main rival, the Palm VII handheld; but it also offered push-delivery, so that emails were delivered instantaneously to the device, saving users from having to log in manually to collect them. The first BlackBerrys were marketed in the US through BellSouth and by Rogers Cantel AT&T in Canada. Gradually, however, a number of other customers signed up to supply the BlackBerry service, and RIM negotiated sales and distribution partnerships with Dell, Compaq and other resellers. In 2000, the BlackBerry was named Product of the Year by InfoWorld magazine, which said it "wins hands down when it comes to easy and timely access to e-mail messages." A year later, an upgraded product range featured a larger screen, offered web browsing, and was also compatible with Lotus Notes and Domino email servers as well as Microsoft Exchange.

The popularity of BlackBerry continued to spread rapidly. In September 2001, the value of RIM's radio-based email delivery system proved itself when it continued to operate in the immediate aftermath of the terrorist attacks in New York and Washington, when cellular communications were blacked out. That resulted in a sharp surge in orders from regional law enforcement and emergency services. The first voice-enabled BlackBerrys, offering phone service as well as always-on email connectivity launched in 2002 through partners including AT&T Wireless, VoiceStream, and Cingular Wireless in the US and Rogers and Microcell in Canada. Later that year, BlackBerry launched in Europe through partnerships with Vodafone in the UK, Deutsche Telekom in Germany, SFR in France and Telecom Italia in Italy. Telefonica launched the service in Spain in early 2003. Since then, RIM has continued to develop its range of products and service partners, and the expansion of highspeed mobile connections has encouraged substantial growth in the company's subscriber base.

Last full revision 11th July 2016

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