a, Opinion

The Blackberry slump

Blackberry, the Canadian tech giant that once led global smartphone sales, has experienced a steep decline over the past three years. The company’s employees are facing huge layoffs, and its stock has dwindled below $9 per share. Despite this dismal deterioration—or perhaps because of it—Blackberry’s largest shareholder, Fairfax Financial Holdings, has offered to take Blackberry private in a $4.7 billion deal.

In the face of such a severe slump, Fairfax Financial CEO Prem Watsa, the so-called “Warren Buffet of Canada,” seems confident in his company’s ability to revive Blackberry’s stagnant situation. His optimism can be attributed to several significant assets that Blackberry still has.  Among these is Blackberry’s powerful security system; a huge attraction for businesses and government clients.  Second is Blackberry’s patent portfolio, which gives the company legal ownership of a wealth of intellectual property.

One branch of the company that Watsa is not particularly eager to acquire, however, is Blackberry’s hardware division.  In the past four years, Blackberry’s smartphone market share has dwindled from nearly 50 per cent in 2009 to roughly 3 per cent currently; the largest decline that any smartphone maker has seen. If the takeover goes forward, it is highly unlikely that Fairfax Financial will continue to produce Blackberry handhelds.

The deterioration of Blackberry as a leading smartphone maker can be attributed to certain shortcomings on the part of the company, as well as powerful competition from competitors, namely Apple and Google’s Android operating system. One underlying flaw was Blackberry’s complacency. In the rapidly evolving smartphone industry, the ability to innovate and adapt to changes in consumer preferences is paramount. Apple revolutionized the smartphone industry with its sleek, streamlined, and easily navigable iPhones, and the Android offered increased functionality with its versatile, easily modified operating systems. Blackberry, which was both reluctant to abandon its signature keypad, and adamant in clinging to its niche of phones catered to businesspeople, quickly fell behind.

By the time that Blackberry finally released the Z10 last February, its first phone without a keypad and first new operating system in two years, it was already too late.  Apple was already on its sixth generation iPhone, and Android had released several updates for the fourth version of its mobile operating system.

More recently, Apple’s latest iPhone release, as well as its heavily redesigned operating software, iOS 7, has completely overshadowed Blackberry as a contender in the smartphone market.  Apple sold nine million of its new iPhones in the first weekend, compared to 2.7 million Blackberry 10 devices in the entire first quarter.

Blackberry’s reign as a leader in the smartphone market has come to a close.  However, whether Fairfax Financial can actually restore some of the Canadian tech company’s former glory in its other divisions, or if the buyout is simply a last-ditch effort to salvage a large investment turned sour, is up for debate. A remaining source of hope for Canada’s prized technology company lies in Fairfax’s domestic approach to Blackberry’s restoration. Fairfax Financial is seeking Canadian equity, most likely in the form of pension funds, to complete the deal.

Spokesman Paul Rivett has been quoted stating that Fairfax is seeking “a strong Canadian solution” for the revival of what was once one of Canada’s most successful companies. Although it seems that Blackberry has lost its foothold in the smartphone industry in the face of American tech giants, a domestic recovery for the company’s more secure markets is possible, and could preserve Canadian influence in the global technology industry.

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