BlackBerry’s Amazon Appstore Deal Should Free Up Resources To Aid Enterprise Focus


BlackBerry (NASDAQ:BBRY) recently signed a deal with Amazon (NASDAQ: AMZN) that will allow it to offer apps from Amazon’s Appstore on its BlackBerry 10 devices. Neither company announced the terms of the agreement. The Appstore, which will be available on BB 10 devices this fall, will serve to more than double the number of apps available to users of BlackBerry’s newest devices and will also introduce several popular titles that were previously unavailable to BlackBerry users. We see this as a positive development for BlackBerry, since it should save the company the time and effort in courting developers to create more apps for its shrinking user base, while allowing it to free up resources to focus on the enterprise and security offerings on which it is betting its future.

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Trefis has an $8.40 price estimate for BlackBerry, which is about in line with the current stock price.

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Addressing BB 10’s Lack Of Apps

Some key developers have been reluctant to create apps for BlackBerry, given that it had a smartphone market share of  below 1% as of Q1 2014. Moreover, the latest BB 10 platform accounted for just about a third of the company’s shipments during Q1, translating to a rather miniscule addressable market for app developers. In comparison, iOS and Android-based devices had combined market share of over 95%, [1] offering developers a much wider audience. While BlackBerry had tried to address the deficit of apps in the past by offering support for Android applications in earlier versions of BB 10,  the installation process was quite cumbersome and not very popular with mainstream users. With the Amazon Appstore, BlackBerry would be adding a library of about 240,000 programs, including popular apps such as Netflix, Candy Crush Saga and Pinterest to the existing 130,000 apps that it offers in its BlackBerry World app store. While this would still fall well short of the number of apps that Apple’s App Store and Google Play offer, it should address some consumer complaints of a poor selection of apps.

BlackBerry Is Staking Less On Its Smartphone Business

BlackBerry’s device sales have been plummeting in recent quarters. During Q4 2014, the company shipped just about 1.3 million handsets (an 80% year-over-year decline) although the sell-through rates were better at around 3.4 million units. Regaining market share seems to be almost out of the question, given the massive gains made by the Android and iOS  smartphone ecosystems. Now, BlackBerry seems inclined to simply stabilize the cash-bleeding handset business,while making it a driver of its enterprise software and service offerings. The company has been making some strategic decisions to outsource segments of its smartphone business and reduce business risk. For instance, last year, it enlisted contract manufacturer Foxconn to increasingly co-develop and produce some of its smartphones. We see the deal to license Amazon’s app store as being just another step in this direction, since it could enable the company to allocate less capital and resources towards developer relations and support, while still offering a growing roster of consumer focused apps. CEO John Chen also indicated that the company would be encouraging its consumer app developers to focus on developing for Amazon’s Appstore, instead of Blackberry’s own app store. [2]

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Notes:
  1. Smartphone OS Market Share, Q1 2014, IDC []
  2. BlackBerry strikes deal to offer Amazon apps on BB10, The Guardian, June 2014 []