Will Android Save Or Destroy BlackBerry?

BlackBerry Ltd BBRY is rumored to be developing a new handset that will feature Google Inc GOOG's Android operating system. According to Reuters (which cited multiple unnamed sources that "have not been authorized to discuss the matter publicly"), this is part of BlackBerry's strategy to "pivot to focus on software and device management." "BlackBerry should have done this two or three years ago," Sean Udall, CIO of Quantum Trading Strategies and author of The TechStrat Report, told Benzinga. He said the company should have moved to Android as soon as Apple Inc. AAPL began to take away market share. "Their response was, 'We'll develop our own OS [and] make it better,'" said Udall. "It totally, totally failed, [but] it's a viable company in much smaller size than it was before. They do have a good network operation. They really do."

Related Link: The Real Reason Apple Needs BlackBerry

'Position Of Weakness'

Global Equities Research analyst Trip Chowdhry thinks the unconfirmed rumor is a sign that BlackBerry may be in dire straits. "That tells me the fundamentals are deteriorating because there's nothing else left for them to do than to be a complete me-too [company]," Chowdhry told Benzinga. "Then they [can] focus on device management and other stuff, which is good. But it seems like they are having some problems executing on that front also." Chowdhry said the question to ask is, "What is their differentiation and how are they gonna do it?" "[This rumor] makes me feel BlackBerry's fundamentals will deteriorate further," he added. "This is not coming from a position of strength, it is coming from a position of weakness. Same thing regarding Apple Music, it's a me-too. Because only a failing company will go and use Android six years after it has been launched. If they were the very first one, like Motorola was, that would have been considered innovation." Cell phone manufacturers were initially skeptical of Android. Chowdhry said that no one wanted to use the OS, but Motorola took the plunge. He said it paid off for the company, inspiring others to follow.

'High Margins'

Udall said that there is a small segment of the population that "almost has to have a BB device" because of its security benefits. He said this will not change "unless and until another company can prove they're as secure or more secure than BlackBerry." "That's why I've said all along that I think BlackBerry is a viable takeout candidate for Microsoft or Amazon," said Udall. "I really thought Google should have bought BlackBerry a long time ago." Udall said that using Android is "pretty much what they have to do to survive." "I think it'll cheapen up their costs quite a lot," he said. "If they didn't have to spend a bunch of money developing OS software, focused on their own network and security and gave up on the hardware side of the business, what do you have? A software company with pretty high margins. I believe that's what [CEO] John Chen is trying to do." Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.
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Posted In: Analyst ColorRumorsTop StoriesTechBlackberryGlobal Equities Researchjohn chenSean UdallTrip Chowdhry
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