No way BlackBerrys will ‘go dark’ as enterprise clients consider options

If BlackBerry Ltd.'s users haven't yet decided whether to give up on their devices, give it a year, or maybe more, for enterprise clients. Many of the company's roughly 70 million subscribers around the world are high-profile enterprise clientele in the health, government and finance sectors, who will be watching the company’s efforts to recover following a second-quarter loss of $965 million US. These are important clients who need reliable, secure wireless devices. Even U.S. President Barack Obama still uses one, according to pictures of his desk by Time magazine in December. Might these enterprise users be worried about the company passing into new owners' hands? BlackBerry could be broken up and sold in chunks. Then it's a guessing game what a new owner would do with the secure BlackBerry enterprise network, on which the devices operate. Is there is a chance, even a remote one, that Obama's BlackBerry could go dark? "No, absolutely not," Brent Iadarola, mobile and wireless analyst with Frost & Sullivan in San Antonio, Tex., said in a phone interview, adding that BlackBerry's enterprise servers will continue to operate. "If they're going to keep something beating, that's it. That's the centrepiece of everything. They'll do all they can internally to maintain that, and if there is an issue and they decide to sell something off, that's value for someone to tap into," he said. Waterloo, Ont.,-based BlackBerry hopes to go private, with some restructuring ahead of it. This month, Toronto investment firm FairFax Financial Holdings Ltd. made an offer to lead a consortium to acquire the smartphone maker for $4.7 billion US, or $9 US per share. At the same time, BlackBerry said it will be exiting the consumer market, abandoning consumer sales and focusing on enterprise clients, which are its biggest-ticket item. In response, T-Mobile USA last week said it will stop selling BlackBerry devices at its stores. Enterprise clients around the world, including those in the Canadian government, are probably wondering whether they will be switching to other devices down the road. Last week, BlackBerry reported a spiralling second-quarter loss of $965 million US, or $1.84 US per share, including a $934-million US writedown on unsold phones and a restructuring charge of about $72 million. BlackBerrys are used by politicos, executives and officials around the world, and from the view of a government or large bank, the process of transitioning thousands of enterprise users from one device to another is a massive organizational undertaking, with large equipment, operational and training costs. It's a decision no large organization will take lightly—which will play into BlackBerry's fortunes by buying the company time. "The last thing they can afford at this point is for enterprise buyers, which will be its future, to be spooked, and go elsewhere," Carmi Levy, an independent technology analyst based in London, Ont., said in a phone interview. Levy said he believes BlackBerry's sales team is now working hard to communicate with its top enterprise clients, ensuring them that there's no risk of a network outage. "Its salesforce is really beating the bushes now to get the message out, and that message is one of longevity," he said. "There is no risk, no worry, that BlackBerrys will suddenly go dark. Not today, not tomorrow, not anytime soon." BlackBerry no longer reports its subscriber numbers, though in its first quarter of 2014, which ended June 1, 2013, the company reported having 72 million subscribers, down from 76 million in the previous quarter and from 80 million during the previous fiscal year, or calendar 2012. Bill Menezes, an analyst with Gartner Research in Denver, Colo., said in a phone interview that his firm is telling large companies they need to start their long-term planning for any possible change in wireless devices or services. "The most extreme option, which some companies will take, is to just completely exit the BlackBerry platform, because they don't want to deal with the uncertainty, and because their needs can be met with things like Apple's platform, iOS," Menezes said. BlackBerry's security system also has far too much value to its enterprise clients for that to diminish quickly. Analysts will point out there was a lengthy process before the U.S. National Security Agency would approve a customized BlackBerry as a wireless device secure enough for President Obama's use. Still, that could be changing, and quickly. Menezes pointed out that the U.S. Defense Department this year approved Apple Inc.'s iPhones and iPads, running on iOS 6, for use on U.S. military networks, where BlackBerry has dominated. Device manufacturers are increasingly developing security features for mobile devices, he said, further complicating matters for the Waterloo company. Menezes said some organizations, like governments, will use a "contain" strategy, where BlackBerry will be discontinued for everyone except managers. They will slowly phase out BlackBerry or continue to use the newest BlackBerry devices and operating system only for senior managers, he said. All organizations planning to stay with BlackBerry, Menezes said, should be prepared to upgrade to the company's new BB10 devices and operating system in the second half of the 2014 calendar year. If BlackBerry becomes a smaller company, filling niche, high-security uses, enterprise pricing for its devices and services could rise due to lower cost efficiencies, Menezes said. A high-security platform, he added, can command a premium. Stephanie Frisina, a spokeswoman for BlackBerry, said in an emailed statement that the company is focused on its enterprise services, which "puts us squarely on target with the customers that helped build BlackBerry into the leading brand today for enterprise security, manageability and reliability." She said enterprise clients are still committing to BlackBerry, with more than 25,000 installations so far of BB10 for enterprise, "and new implementations" around the world each day. "We are showing customers how BlackBerry 10 is the best solution for these users who value features and applications that make them work more efficiently, as well as demonstrating how BlackBerry Enterprise Service 10 delivers the industry's best enterprise mobility management tools," Frisina said. BlackBerry's would-be buyers may keep its enterprise servers running, though competitors will look to acquire some pieces of the company if it's broken up, Iadarola said. "In the worst case scenario, you might see some spinning off or winding down of certain aspects of the business," he said. BlackBerry's network operations centre and entire enterprise services framework has formed "deep connections" with hundreds of mobile providers around the world, he said, and those relationships alone, not to mention BlackBerry's existing enterprise customers, have significant value. If BlackBerry's users don't have to worry about a blackout, perhaps the hardest part will be the "niche" devices’ increasing separation from the consumer market. "You'll see shelf presence continue to drop among a number of mobile operators, in my opinion. The other thing, which will be the most difficult component for BlackBerry to absorb, is you're going to see a lot of application developers fleeing from BlackBerry," Iadarola said. In short, Blackberry’s future may be more secure than believed, though less fun. —With reporting by Simon Doyle at sdoyle@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

No way BlackBerrys will ‘go dark’ as enterprise clients consider options

News | September 30, 2013

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