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Why Nokia Is Trying to Guide Smart Cities Implementation

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BlackBerry (BBRY) may be pivoting away from the mobile hardware business, but that doesn’t mean the BlackBerry brand is about to disappear. According to a Digital Trends report, BlackBerry could take the opportunity at the MWC 20171 conference to launch a budget handset codenamed BlackBerry BBC-100-1. The BBC-100-1 would accompany the BlackBerry Mercury, which is also expected to be unveiled at the event, and would expand BlackBerry’s line of Android handsets.

Although the pricing of the BlackBerry BBC-100-1 is still unknown, leaked details about its specs suggest it would be targeted at the entry-level market. The chart below shows the ranking of mobile operating systems by market share.BlackBerry’s market share
The market share for the BlackBerry OS continues to shrink, falling to ~0.05% in 4Q16, according to Gartner. BlackBerry seems to have accelerated the decline with its shift to the Android platform for its new handsets.

Negligible impact on Apple
A budget BlackBerry device would likely have no impact on Apple’s (AAPL) iPhone sales. In 1Q17, most iPhones that Apple sold were the more expensive iPhone 7 Plus. The iPhone 7 Plus fared better than the iPhone 6S Plus a year earlier, according to CIRP (Consumer Intelligence Research Partners). The iPhone 7 series contributed 72% to Apple’s iPhone sales in the US (SPY) in 1Q17, and 15% of iPhone 7 sales went to former Android users.

While the BlackBerry brand may still ring a bell in the smartphone market, an entry-level BlackBerry handset unveiled at the MWC 2017 and released this year could help sustain the BlackBerry brand’s legacy. However, it may do little to steal share from Apple or Samsung (SSNLF).Nokia could feel the heat
However, a budget BlackBerry handset could rattle Nokia (NOK), Sony (SNE) and Chinese smartphone vendors Huawei and Xiaomi.

How BBM Enterprise Could Impact BlackBerry’s Software Business
By Rachel Gunter | Mar 27, 2017 1:12 pm EDT
Integration with third-party apps
BlackBerry (BBRY) recently made a move that could be a shot in the arm for its software-oriented turnaround efforts. The company has moved to allow integration of its BBM Enterprise messaging feature into third-party apps.

As a result, developers for Apple’s (AAPL) iOS and Alphabet’s (GOOGL) Android can integrate BBM Enterprise in their apps, expanding the functionality and appeal of those apps. Given its robust security credentials, BlackBerry’s BBM Enterprise is a popular mobile communications platform for government and business users.By opening BBM Enterprise SDK (software development kit) to third-party developers, BlackBerry has also unlocked a new revenue stream in its Software and Services segment. The company could take a cut from the sales of third-party apps integrated with its BBM Enterprise feature. The chart above shows BlackBerry’s annual software revenues.

Software revenues to grow 30%
BlackBerry’s Software and Services revenues increased 16% YoY (year-over-year) to $160 million in fiscal 3Q17.1 The company’s management guided software sales in fiscal 20172 to increase 30% to ~$640 million. Software revenues totaled $494 million in fiscal 2016.

How third-party integration would work
According to ZDNet, Uber could take advantage of BBM Enterprise third-party integration to improve the connection between customers and drivers. The functionality could be enabled so that when an Uber driver is en route to pick up a client, his or her status changes to “E” and then to “A” upon arrival.

By making the third-party integration move, BlackBerry has also sharpened its competitive edge against International Business Machines (IBM), MobileIron (MOBL), and Citrix (CTXS) in the enterprise software market.

Does It Matter That BlackBerry’s OS Market Share Is Almost Gone?
By Rachel Gunter | Mar 27, 2017 1:12 pm EDT
Android takes 81.7% share of the market
It might seem like the end of an era for BlackBerry (BBRY) with the latest data from research firm Gartner. Gartner reported that the company’s share of the mobile OS market was ~0.05% in the December quarter, down from 0.1% in the prior quarter.

BlackBerry shipped just 207,900 devices running its native operating system during the quarter. Yet, more than 432 million handsets were shipped in the quarter, with devices running Alphabet’s (GOOGL) Android accounting for 81.7% of the sales and Apple’s (AAPL) iOS accounting for 17.9%. The chart below shows device unit sales by top vendors in 4Q16.

Software and Security business
The direction taken by BlackBerry’s CEO, John Chen, doesn’t seem to be much cause for alarm. BlackBerry has essentially abandoned its Hardware business to focus its resources on growing its Software and Security segment.

Instead of struggling to gain share in a market where it is losing money, BlackBerry decided to focus the company on the key strengths of its Software and Device Management business. BlackBerry noted that its software sales grew 16% in fiscal 3Q17 and that they would grow 30% in fiscal 2017. Further growth is expected in going forward.

Tapping into third-party platforms
Despite BlackBerry’s diminishing OS market share, the company is steadily penetrating third-party operating systems with its software and services such as BBM. In a recent move, the company opened BBM Enterprise’s SDK (software development kit) to third-party developers, which would allow them to integrate BBM Enterprise features into their iOS and Android apps. BlackBerry would collect revenues from such integration.

The rise of Apple, Samsung (SSNLF), Sony (SNE), and Microsoft (MSFT) has choked the smartphone life out of BlackBerry. However, BlackBerry is compensating for the loss with its aggressive Software and Services segment push.

How Suing Nokia over Patent Violations Can Impact BlackBerry

BlackBerry (BBRY) has taken Nokia (NOK) to court, accusing the Finnish communications equipment maker of using several of its patents illegally. The disputed patents are related to data transmission technology. BlackBerry claims the infringed patents can be found in Nokia’s devices and software.

Instead of seeking to block the sale of Nokia products bearing its patents used without permission, BlackBerry wants to extract payment from Nokia for illegally using its patents, according to technology news website Ars Technica. BlackBerry says in court documents that Nokia has violated nearly a dozen of its patents.

The chart above shows companies with the largest number of patent approvals in 2016. BlackBerry isn’t featured on the top ten list.

Financial shot in the arm
If BlackBerry successfully sues Nokia and is awarded compensation, it would get a financial shot in the arm. The company could use such a financial windfall to strengthen its software business, which is where it has staked its future. BlackBerry is doubling down on its mobile software and services investment to offset losses in the handset market, which is dominated by Apple (AAPL) and Samsung (SSNLF).

BlackBerry noted that its software revenues in fiscal 3Q171 rose 16% YoY (year-over-year) to $160 million. BlackBerry is expecting software sales of $640 million in fiscal 2017,2 suggesting 30% growth over fiscal 2016.

Licensing brand
BlackBerry and Nokia, which are now fighting over patents, have outsourced their handset manufacturing operations. Nokia has returned to the handsets business after a two-year break following the sale of its Devices unit to Microsoft (MSFT) in 2014.

BlackBerry’s decision to outsource its hardware operations arose from the need to curb losses in its smartphone market.

Nokia Hopes to Unveil Multiple Handsets in 2017

The company is reportedly working on more than half a dozen mobile devices to be unveiled this year. Nokia’s handset pipeline is said to include the iconic feature phone Nokia 3310, a device that became popular in the pre-smartphone era because of its robust build and longer battery life. The chart below shows the top smartphone brands by market share in 4Q16, according to Gartner.

Nokia and Android
Nokia returned to the handset spaceafter a two-year hiatus with the Nokia 6, a smartphone running Alphabet’s (GOOGL) Android operating system. The device was released in late 2016 in China (FXI) (MCHI) and retailed for $245. The handset boasts 4GB of RAM, 64GB of storage, a 16MP back camera, and an 8MP front camera.

However, rumors point to Nokia launching more smartphone models this year, with the list including Nokia 5, Nokia 3, Nokia E1, and Nokia Pixel.

Headaches for Huawei
Nokia’s return to the phone business is likely to rattle Huawei, Xiaomi, BBK Electronics, and other budget handset makers. The new Nokia handsets expected to be released in 2017 appear to be aimed at the entry-level market, which would increase their appeal among consumers in the developing world. Huawei and Xiaomi have grown rapidly by targeting consumers in emerging markets with budget smartphones offering impressive features.

Nokia could stir the waters for mid-range handset makers such as Sony (SNE) and BlackBerry (BBRY).

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