BlackBerry's Value Could Be in Pieces

Should Washington?s BlackBerry power users be worried about the future of Research In Motion, the Canadian company that makes the iconic smartphones? The answer is a somewhat shaky "not quite yet."

BlackBerry remains the device of choice among federal IT managers. The U.S. government is RIM?s largest customer, and the company reports that 400,000 U.S. government users upgraded to a new BlackBerry device in the company?s fiscal 2012, which ended in February. The company did not supply data on the total population of U.S. government users, but these numbers suggest RIM services a fair portion of the 1.2 million federal government customers.

(RELATED: Washington Ready to Move On Without BlackBerry)

There?s the potential for more good news on the horizon. The Pentagon certified the BlackBerry 7 for use in May, setting the stage for the 250,000 military customers to purchase upgrades.

But with reported losses for the last quarter in excess of $500 million, share prices at an all-time low, continuing delays on its next-generation BlackBerry 10 product launch, and 5,000 layoffs set to be completed before the end of the year, the maker of the legendary BlackBerry is doing a fair impression of a company on its last legs.

Outside of the U.S. government, Research In Motion has 78 million users worldwide and $2.2 billion in cash on hand, but the company?s products are clearly losing favor among high-end smartphone customers. Most of their new users are coming in at the low end, buying cheap BlackBerrys at bargain prices set to move a backlog of inventory.

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The company has retained two investment banks, which are ?evaluating strategic options in various dimensions,? RIM Chief Executive Thorsten Heins said, somewhat cryptically, on the company?s Monday earnings call. The worry is that despite its core strength in government and enterprise, the company won't be able to keep up with user demand for features and technology.

?A strategic sale of assets is a possibility. Licensing is a possibility,? said Noah Elkin, principal analyst for mobile at the research firm eMarketer. ?Certainly everyone?BlackBerry enterprise clients, developers, networks?have got to be hedging,? knowing that those possibilities are on the table, Elkin said.

Given RIM?s history of catering to enterprise clients, the future of BlackBerry could be not as the handset with a QWERTY keyboard, but as an invisible, back-end layer of security, connecting devices to corporate and government networks. The company insists that it?s committed to a future as a full-service manufacturer, but if the company is broken up for a sale, the enterprise and government network-management and security assets would have to be considered one of RIM?s most valuable pieces.

Daniel Ernst, technology analyst for Hudson Square Research, recently upgraded RIM from a hold to a buy, largely on the strength of the standalone value of its secure network and customer base. ?Citibank has been hacked, everyone?s been hacked,? Ernst told Barron?s. ?RIM?s security is so good that foreign governments are begging RIM for the code.?

As more business and government users look to have a single device for work and personal use, IT managers are finding ways to deal with the challenge of securing multiple types of smartphones to enterprise networks. RIM is getting in on this game with BlackBerry Fusion, a support system that links Apple iPhones and devices with the Android operating system to a BlackBerry server.

?Mobile-device management was introduced by RIM, and we will continue to use our unmatched experience and knowledge to meet the needs of our enterprise and government customers both today and in the future,? Peter Devenyi, RIM's senior vice president of enterprise software, said in an e-mailed statement.

The launch of BlackBerry 10, a device, operating system, and apps ecosystem envisioned as a competitor to Apple or Android, has been pushed back to the first quarter of 2013?the latest of many delays. It?s not clear whether there will be a consumer or business appetite for a new mobile-computing platform, even one bearing the BlackBerry name. Many industry analysts are resigned to the inevitability of RIM?s breakup or sale before BlackBerry 10 ever launches.

BlackBerry?s fundamental error, Elkin says, was failing to realize in time how important the ?vertical model of integration of hardware, content, and services? offered by Apple and Android was for reaching consumers. More than just failing to pivot to new business opportunities, Elkin said, RIM missed a key cultural and technological shift in the way users interact with devices.

?BlackBerry was the kind of device that did well when you had a strict separation between mobile and desktop,? Elkin said. It was great for communications but less effective as a portable computer. ?BlackBerrys function in an older idiom,? he said, ?as a way to communicate when you are away from your desk.?

Source: http://news.yahoo.com/blackberrys-value-could-pieces-080013106.html

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