Brian Blair, an analyst at Wedge Partners, wrote an open letter to John Chen, Blackberry CEO, urging the Canadian firm to “leave behind the high end of the market and attack the low end.”
Here is part of his letter:
As you prepare to report another weak quarter of declining metrics and significant cash burn, I wanted to provide some thoughts on the one opportunity path I believe you still have. Wall Street believes you’re dead, Bloomberg Businessweek recently called you ‘a relic’ on their front page and I have taken plenty of shots at you myself over the last year. Investors, it seems, are largely counting the days until you fold. If you stay on the path you’ve been on, Blackberry will end with all of the various parts of the company getting chopped up and sold to the highest bidder. However, I think you have a way of avoiding that.
To start with, the good news in all of this is no one has any expectations for you. The bad news is: to survive you are going to have to admit defeat in a few very public ways and be willing to move the company in a direction that is not as sexy as the high end of the smartphone (or tablet) market. But there is hope, if you’re willing to look downstream and focus purely on the emerging market. This isn’t about winning anymore, it’s about surviving. The cash injections are going to get harder to come by next year if you don’t have a solid plan and path to profitability.
There is only one way for you to survive as a smartphone company. You need to completely leave behind the high end of the market and attack the low end with vigor, touting your famous keyboard as a primary differentiator and offering consumers migrating from feature phones access to the most important services of the Internet. The fact is: many people still like keyboards, and no one has done them as well as Blackberry, but you are going to have to take the fight downstream. I estimate that globally, you should be able to sell 100+ million units a year profitably if you move fast. Just look at what all the major mobile players are suggesting: the high end is slowing, the low end is where the growth is. Yes, the ASPs are low, margins are slim, and the competition is fierce, but it’s the only place you have a shot of selling units. Over time, you may be able to move upstream to the mid-tier if you can grow a dedicated user base, but let’s not get ahead of ourselves.
Do you agree with Blair? Drop a comment below.