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Why now, BlackBerry?

Updated Aug 12th, 2013 10:05AM EDT
BlackBerry Sale

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Just a few months ago, BlackBerry seemed dedicated to going alone. Now, the company is surprisingly blunt about its willingness to consider a joint venture or selling the company. Why now? Well, the crucially important “value” model Q5 launched about six weeks ago in the UK and Africa, markets that used to be BlackBerry’s cornerstones just two years ago. The Q5 gained sudden importance after the high-end Q10 and Z10 phones put in disappointingly weak volume performances during the May quarter, driving BlackBerry’s U.S. market share down to just 1.1% according to one estimate.

The problem with the Q5 is that it is priced well above $400. That is the dead zone of the current smartphone market where the $600-plus niche belongs to Apple and Samsung and value buyers are migrating towards sub-$200 phones.

BlackBerry received early sales numbers from the Q5 by the end of July from its most important Western base in the UK and the key emerging markets like South Africa and Nigeria. It is quite likely that these early Q5 figures were so scary they pushed BlackBerry into the radical decision of publicly announcing it may need a buyer.

There is no sign of BlackBerry being close to launching a true budget device; the upcoming BlackBerry Z30 looks like high-priced white elephant and no other BlackBerry 10 phones are expected to launch this year.

So in August 2013, BlackBerry finds itself with a product portfolio of two luxury models and one expensive mid-market model — and with an imminent launch of a high-priced phablet. This is the moment when BlackBerry’s board of directors has finally realized the current pricing approach has placed the company on the road to ruin.

Somewhere in Waterloo, a group of depressed Canadians have stared mutely at the turbid waters of Columbia Lake and finally allowed reality to sink in.

The problem is that even if somebody opts to buy BlackBerry, it would take until the end of 2014 to really implement a substantial product course correction. The good news is that the company has billions of loonies in cash and it will take a long time to burn through to the hoard. There is still time. There are fascinating potential combos out there: DellBerry, LenovoBerry, SonyBerry. All of them would combine two fading consumer electronics lines, but it’s true that the oddball Sony Ericsson melange came very close to actually succeeding in mid-Noughties.

Whatever happens, must happen soon — before the cash burn starts eating through BlackBerry’s remaining chest of gold.

After launching mobile game company SpringToys tragically early in 2000, Tero Kuittinen spent eight years doing equity research at firms including Alliance Capital and Opstock. He is currently an analyst and VP of North American sales at mobile diagnostics and expense management Alekstra, and has contributed to TheStreet.com, Forbes and Business 2.0 Magazine in addition to BGR.