Is BlackBerry + Android A Good Idea?

June 12th, 2015 by Trefis Team

BlackBerry (NASDAQ:BBRY) is contemplating using Google’s Android operating system to power an upcoming smartphone, according to a report from Reuters, which cites sources familiar with the matter. [1] The device is reported to combine a touch screen with a slide-out keyboard and could potentially launch this fall. While BlackBerry’s BB10 OS based devices have been clearly struggling – with market share falling to just 0.4% in 2014, according to IDC – the addition of an Android-based device could have very mixed implications for BlackBerry’s smartphone business. Here’s a quick rundown of the pros and cons for BlackBerry if it were to jump on the Android bandwagon.

We have a $10 price estimate for BlackBerry, which is slightly ahead of the current market price. We estimate that BlackBerry’s device business accounts for about 21% of the company’s value.

See our complete analysis for BlackBerry here

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The Pros of Launching an Android Handset:

  • Giving Customers The Best Of Both Worlds: BlackBerry devices haven’t been able to compete well with Android devices and the iPhone, partly due to a lack many prominent applications on the BB10 platform. A shift to Android would certainly address this issue. Additionally, BlackBerry’s Android device could potentially come with some of the patented features present on BB10, in addition to including BlackBerry’s security, productivity and communications applications, potentially making it easy for existing users of the BlackBerry operating system to migrate. The combination of a stronger app ecosystem and BlackBerry’s signature features would offer customers the best of both worlds.

  • Marketing BES 12 To Android Users: BlackBerry has been transitioning its business model towards enterprise mobility and security-focused software such as BlackBerry Enterprise Server 12, which the company is looking to sell to all major mobile platforms including iOS, Android and Windows. However, the company has been facing difficulties in convincing big customers that its device management software works well across many different platforms. By launching its own Android phone, the company would be sending a signal that it is confident that BES can manage and secure mobile devices from rival platforms as well.
  • Cutting Product Development Costs: BlackBerry has cut the headcount of its mobile device operations significantly, with many rounds of job cuts over the last two years. Adopting Android software for some its devices could help to further bring down device and software development costs for the company, since it would only need to customize the readily available Android software for its devices, rather than build/maintain new versions of BB OS.

The Cons of Launching a Android Handset:

  • Product Differentiation Is Hard On Android: Product differentiation within the Android smartphone space is weak, with vendors primarily differentiating themselves based on specifications and pricing. Although Android vendors account for more than 75% of smartphones sold globally, they collectively bring in just about 11% of global smartphone profits. [2] Although BlackBerry’s handset division was not profitable during the last fiscal year, the BB10 OS has been able to create a niche for BlackBerry handsets, given its reputation for stability, security and privacy. The introduction of an Android-based Blackberry handset could have an negative impact on BlackBerry’s handset division’s already thin margins, considering the intense competition in the Android market.

  • Less Control Over The Ecosystem: BlackBerry’s current smartphone strategy revolves around controlling the hardware, operating system, applications and services (secure communications, containerization, device management etc.) on its devices. This end-to-end strategy gives customers a high-level of confidence about the platforms security features and serves as an important marketing point for the company. However, if BlackBerry were to source the OS from Google, it would effectively be relinquishing some of the control it has over its devices. Even if BlackBerry is able to provide the same level of security and control on its Android-based devices, it probably won’t help its marketing narrative.

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Notes:
  1. Exclusive: BlackBerry may put Android system on new device: sources, Reuters, June 2015 [↩]
  2. Strategy Analytics: Android Captures Tiny 11 Percent Share of Global Smartphone Profit in Q4 2014, PR Newswire, February 2015 [↩]