Samsung Puts BlackBerry In Its Crosshairs With Knox Launch

by Trefis Team
Samsung Electronics
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Having done really well in the consumer market, Samsung (PINK:SSNLF) is now training its sights on enterprises and government agencies. The South Korean electronics giant announced the Samsung Knox, an enterprise mobile solution that will enable customers to use a single phone for both “work and play”, at the Mobile World Congress earlier this week. [1] Samsung expects Knox to nicely complement its existing security suite for the enterprise, dubbed SAFE (Samsung for Enterprise), which it has been actively promoting lately. With SAFE and Knox, Samsung aims to make its Android smartphones more secure and take advantage of the ongoing BYOD (Bring Your Own Device) trend to directly challenge BlackBerry (NASDAQ:BBRY) in the enterprise.

At the same time, Samsung will be clashing swords with Apple in a new market where the iPhone maker has been doing really well of late. Apple recently announced a couple of important wins at Home Depot and the New Zealand government, both of which came at the expense of BlackBerry. While Home Depot was reported to have replaced over 10,000 BlackBerry smartphones with iOS devices, the New Zealand police force plans to arm 6,000 officers with iPhones and about two-third of them with iPads over the next three months. Other notable agencies that have recently announced their BlackBerry to iOS migrations include the U.S. Immigrations and Customs Enforcement Agency, the National Transportation Safety Board and Australia’s Treasury Department.

See our complete analysis for Samsung here

Why Samsung wants a piece of the enterprise pie

The growing number of enterprises and government bodies making the switch away from BlackBerry means that a big market exists for Samsung to enter and assert its dominance. As the BYOD trend catches on and enterprises increasingly allow employees to use their personal devices for work, Samsung will look to leverage its retail popularity to increase its presence within the safer and more stable non-retail sector. While the retail market is open to the vagaries of high competition and eventual commoditization of the market, enterprises generally enter into multi-year contracts and are therefore less prone to changing vendors as often as retail buyers do. It is due to this stability that corporate customers offer that BlackBerry has managed to generate cash in the last few quarters despite seeing its handset revenues fall by nearly half in the past year.

Challenges for Samsung

As of now, however, only Apple has managed to make the most of the opening that BlackBerry’s waning popularity has left in the enterprise market. According to market research firm IDC, Apple accounted for over 50% of all smartphones that were shipped to enterprise customers last year, while BlackBerry saw its share shrink to only about 10%. Samsung meanwhile shipped around 16% of the enterprise phones.

A big reason for Apple’s recent lead has been enterprises’ greater comfort with the closed iOS ecosystem and better levels of security. On the other hand, Android is fragmented and is used by multiple handset makers, potentially making it easier to hack. Moreover, the security applications developed for Android phones are perceived to be more susceptible to bugs. It is because of these limitations that BlackBerry continues to be the gold standard for security among enterprises despite its recent market share travails. Samsung therefore has some way to go in convincing large corporations but those with a less stringent security requirement may look at adopting its smartphones for the workplace.

Concerns for BlackBerry

As for BlackBerry, Samsung’s greater push into the enterprise and the loss of enterprise customers to Apple is a matter of grave concern. The Push Email division, which includes BlackBerry services such as push e-mail and BBM and is dependent on enterprise patronage, is BlackBerry’s most valuable division currently, accounting for almost 35% of our $12 price estimate for the stock. We estimate that the enterprise service ARPU will decline steadily to about $2 by the end of our forecast period as BlackBerry slashes service prices or brings in lower-priced tiers to retain customers. If the launch of BB10 and the new BES upgrade doesn’t stem the decline in corporate loyalty, the repercussions could be even bigger.

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  1. Samsung plans to conquer the workplace with KNOX mobile security suite, BGR, February 25th, 2012 []
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