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Recommendation for BlackBerry Limited
- 1. Recommendation for BlackBerry Limited SeniorExecutives Ryan Wang Alex Ngo William Sung Regina Ip
- 2. Executive Summary_____________________________________________________________________________________________________________________________________________ •Short term:To increase the company’s profit margin •Long term: To gain independence and become a profit centerGoals •Underutilization of facility resources •High employee turnover rate •Decrease in interline sales Issues Recommendations • Reduce the production of hardware will increase overall profit margin • Expand the IoT services will gain market share in the software industryImpacts To increase company profit Decrease in hardware revenue To expand into the software industry To reduce hardware services To expand IoT services 2
- 3. Company Background_____________________________________________________________________________________________________________________________________________ • Previouslycalled “Research in Motion” • A Canadian based company, headquartered in Waterloo • Provides wireless devices, software, and services for the telecommunications market ANALYSIS | Alternatives | Recommendations | Implementations | Risks 3 Software • Internet of Things (IoT) • BlackBerry Messaging (BBM) • BES12 Multi-OS MDM Hardware • Smartphones
- 4. Highlights_____________________________________________________________________________________________________________________________________________ • Well-known securityencryption featured • Preferred enterprise and government phone • QWERTY keyboard ease typing experiences • Positive cash flow of $1.2 billion • Strong relationship with 650 worldwide carriers ANALYSIS | Alternatives | Recommendations | Implementations | Risks 4
- 5. Core Competencies_____________________________________________________________________________________________________________________________________________ Patents Product Differentiation Quality Customer- centric ANALYSIS |Alternatives | Recommendations | Implementations | Risks 5
- 6. Issue: Decrease in HardwareSales _____________________________________________________________________________________________________________________________________________ Decrease in hardware revenue Change in customers’ preferences Loss of a major customer Increased competition 6ANALYSIS | Alternatives | Recommendations | Implementations | Risks
- 7. Cause 1: Change inCustomers’ Preferences_____________________________________________________________________________________________________________________________________________ ANALYSIS | Alternatives | Recommendations | Implementations | Risks 7 52.6% 42.7% 7.0% 2.8% Top U.S. Smartphone Operating Systems for Market Share Android OS Apple iOS BlackBerry Microsoft
- 8. Cause 1: Change inCustomers’ Preferences_____________________________________________________________________________________________________________________________________________ 1,300,000 1,200,000 300,000 240,000 130,000 0 250,000 500,000 750,000 1,000,000 1,250,000 1,500,000 Google Play Apple App Store Windows Phone Store Amazon Appstore BlackBerry World NumberofApps Number of Available Apps Among the Apps Stores ANALYSIS | Alternatives | Recommendations | Implementations | Risks 8 • Developers have no incentive to create apps for BlackBerry
- 9. Cause 2: Loss ofthe US government_____________________________________________________________________________________________________________________________________________ 9ANALYSIS | Alternatives | Recommendations | Implementations | Risks REASONS BlackBerry slowly reduce the OS10 device production After-sales services might not be satisfied IMPACTS Loss of one of the major market share Brand image got weaken
- 10. Cause 3: Increased Competitions_____________________________________________________________________________________________________________________________________________ ANALYSIS| Alternatives | Recommendations | Implementations | Risks 10 4.04 6.41 13.78 26.01 36.71 52.30 49.00 28.10 13.70 7.00 3.20 0 10 20 30 40 50 60 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 NumberofSmartphonesSold Number of BlackBerry Smartphones Sold by Fiscal Year (in millions)
- 11. Cause 3: Increased Competitions_____________________________________________________________________________________________________________________________________________ •Mobile phone manufacturing has a high fixed cost • Requires to sell 10 million phones a year to make a profit ANALYSIS | Alternatives | Recommendations | Implementations | Risks 11 Year Gross Margin (USD) 2015 $0.483 2014 $0.431 Low Gross Margin + Low Sales = Low Sales Revenue
- 12. Alternatives_____________________________________________________________________________________________________________________________________________ Analysis | ALTERNATIVES| Recommendations | Implementations | Risks 12 Increase company revenue Partner with Software Company Reduce Hardware Services Improve Adoption of BBM
- 13. Decision Matrix_____________________________________________________________________________________________________________________________________________ Analysis |ALTERNATIVES | Recommendations | Implementations | Risks 13 Partner with Software Company Reduce Hardware Services Improve Adoption of BBM Short-term Profit Generating Reduced Risk − Cost Efficient − Customer Reach
- 14. Short-Term Recommendation: Reduce HardwareServices_____________________________________________________________________________________________________________________________________________ • Reduce the varieties of smartphones • Hardware business has been struggling for the past years • Hardware segment performance has not been improved • Slack resources are required to expand other profitable businesses Analysis | Alternatives | RECOMMENDATIONS | Implementations | Risks 14
- 15. Short-Term Recommendation: Reduce HardwareServices_____________________________________________________________________________________________________________________________________________ • Reduce the varieties of smartphones • Keep BlackBerry PRIV (consumer) and Passport (enterprise) Analysis | Alternatives | RECOMMENDATIONS | Implementations | Risks 15 BlackBerry PRIV BlackBerry Passport Operating System Android OS BlackBerry 10 OS Advantages • Currently popular for the mainstream market • Provide a secure platform for its clients • Maintain a sustainable relationship with Google • Reasonable pricing for enterprise • Improve the varieties of apps • Target specifically to enterprise with premium features
- 16. Short-Term Recommendation: Reduce HardwareServices_____________________________________________________________________________________________________________________________________________ Analysis | Alternatives | RECOMMENDATIONS | Implementations | Risks 16 7.07 8.99 11.05 12.47 17.34 14.41 9.37 16.19 9.46 9.2 0 2 4 6 8 10 12 14 16 18 20 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 BlackBerry Inventory Turnover Ratio 2014 2015 2016 Inventory Write-Down ($) 1,600 million 95 million 36 million • Minimize the inventory cost
- 17. Long-Term Recommendation Expand onInternet of Things (IoT) Software
- 18. Long-Term Recommendation: Expand onInternet of Things (IoT) software _____________________________________________________________________________________________________________________________________________ • Internet of Things • Allow machines to communicate with each other • Provide the ability to transfer data over a network • Increased risk of information breach Analysis | Alternatives | RECOMMENDATIONS | Implementations | Risks 17
- 19. Long-Term Recommendation: Expand onInternet of Things (IoT) software _____________________________________________________________________________________________________________________________________________ • Software has a high gross margin (80%) • Potential growth of 225% (14.3 billion units) from 2016 to 2020 • Requires high technology of security features Analysis | Alternatives | RECOMMENDATIONS | Implementations | Risks 18 Creates a business opportunity for BlackBerry
- 20. Long-Term Recommendation: Expand onInternet of Things (IoT) software _____________________________________________________________________________________________________________________________________________ • Transfer 30% of R&D funds from hardware to IoT software • Target manufacturing (factories) businesses Analysis | Alternatives | RECOMMENDATIONS | Implementations | Risks 19 0.2 0.6 0.4 0.2 0.9 1.2 0.9 0.9 1.2 1.6 1.7 3.7 WORK SITES OUTSIDE RETAIL HUMAN CITIES FACTORIES GENERATED REVENUES USING INTERNET OF THINGS IN 2025 (IN TRILLIONS) Low Estimate High Estimate
- 21. Long-Term Recommendation: Expand onInternet of Things (IoT) software _____________________________________________________________________________________________________________________________________________ • Gradually increase the R&D funds of IoT services to grow organically • Further target companies that require high quality control • Expand market potential with showrooms and exhibitions Analysis | Alternatives | RECOMMENDATIONS | Implementations | Risks 20
- 22. Short-Term Implementation Plans _____________________________________________________________________________________________________________________________________________ Tasks Month(s) 1 23 4 5 6 7 Inform related suppliers and distributors of discontinued product lines CFO initiates the reallocation of R&D funds Discontinue the production of selected products Restructure employees to related departments Inform the public and amend the after-sales services Analysis | Alternatives | Recommendations | IMPLEMENTATIONS | Risks 21
- 23. Long-Term Implementation Plans _____________________________________________________________________________________________________________________________________________ Tasks Year(s) 0.5 11.5 2 2.5 3 3.5 Further decide the target market in manufacturing industry Hire expertise for IoT development Customize the software for the target manufacturing industry Participate in IoT related exhibitions and showrooms If successful, expand IoT services to other industries Analysis | Alternatives | Recommendations | IMPLEMENTATIONS | Risks 22
- 24. Risks and Mitigation _____________________________________________________________________________________________________________________________________________ RiskLikelihood Impact Mitigation Customer dissatisfaction with amended after-sales services Medium Low Offer discount for new products or services migration Employee dissatisfaction of the workforce restructuring High Medium Provide additional training and internal transfer to the suitable department Might take too long to develop IoT Medium Medium Must regularly update the project status report Unable to monetize new IoT software Low High Continue to strengthen relationship with hardware manufacturers to reduce implementation cost Analysis | Alternatives | Recommendations | Implementations | Risks 23
- 25. Recap_____________________________________________________________________________________________________________________________________________ •Short term: Toincrease the company’s profit margin •Long term: To gain independence and become a profit centerGoals •Underutilization of facility resources •High employee turnover rate •Decrease in interline sales Issues Recommendations • Reduce the production of hardware will increase overall profit margin • Expand the IoT services will gain market share in the software industryImpacts To increase company profit Decrease in hardware revenue To expand into the software industry To reduce hardware services To expand IoT services 24
- 26. Overview_____________________________________________________________________________________________________________________________________________ Company Background Highlights Core Competencies Issuesand Causes Alternatives Short-Term Recommendation Long-Term Recommendation Implementation Plans Risk and Mitigations Analysis | Alternatives | Recommendations | Implementations | Risks 25
- 27. Appendix _____________________________________________________________________________________________________________________________________________ Why chose IoT? GrossMargin of Hardware and Software Reasons for 30% R&D Funds Allocation Revenue Sources for Internet of Things (IoT) Active Users of BlackBerry Messaging (BBM) in 2015 Potential Growth of IoT in Home Business Potential Growth of IoT Installed from 2016 to 2020 Disadvantages of BlackBerry Classic & Leap BlackBerry’s Current Product 26
- 28. Decision Matrix_____________________________________________________________________________________________________________________________________________ 27 Internet ofThings (IoT) BES12 Multi-OS MDM BlackBerry Messaging (BBM) Potential Market Growth − Reduced Risk − − Cost Efficient Customer Reach
- 29. Gross Margin ratio= Gross Margin Revenue Gross Margin of Software and Hardware_____________________________________________________________________________________________________________________________________________ For the Three Months Ended May 31, 2016 (in millions) Software & Services Mobility Solutions Revenue $ 166 $ 152 Cost of goods sold 32 140 Gross margin $ 134 $ 12 Gross margin ratio 80% 8% 28
- 30. Reasons for 30%R&D Funds Allocation_____________________________________________________________________________________________________________________________________________ • A reasonable portion based on 80/20 rule • Reduced risk due to the existing IoT software services on automotive and asset tracking 29
- 31. Revenue Sources ofInternet of Things (IoT)_____________________________________________________________________________________________________________________________________________ 30 0.1 0.2 0.2 0.2 0.6 0.4 0.2 0.9 1.2 0.2 0.3 0.7 0.9 0.9 1.2 1.6 1.7 3.7 OFFICES HOMES VEHICLES WORK SITES OUTSIDE RETAIL HUMAN CITIES FACTORIES GENERATED REVENUES USING INTERNET OF THINGS IN 2025 (IN TRILLIONS) Low Estimate High Estimate
- 32. Active Users ofBlackBerry Messaging (BBM)_____________________________________________________________________________________________________________________________________________ 48 91 181 200 236 300 500 576 600 700 0 100 200 300 400 500 600 700 800 Kakao BlackBerry Line KIK Viber Skype Wechat QQ Mobile FB Messenger Whatsapp Active Users of Global Mobile Messenger App in 2015 (in millions) 31
- 33. Potential Growth ofIoT in Home Business_____________________________________________________________________________________________________________________________________________ 32
- 34. IoT Units Installedfrom 2016 to 2020 (in millions)_____________________________________________________________________________________________________________________________________________ Category 2014 2015 2016 2020 Consumer 2,277 3,023 4,024 13,509 Business: Cross –industry 632 815 1,092 4,408 Business: Vertical-specific 898 1,065 1,276 2,880 Grand Total 3,807 4,902 6,392 20,797 Analysis | Alternatives | Recommendations | Implementations | Risks 33 Estimated Growth = 20,797 − 6,392 6,392 × 100% ≈ 225%
- 35. Reasons for Reductionof BlackBerry Classic & Leap_____________________________________________________________________________________________________________________________________________ Analysis | Alternatives | Recommendations | Implementations | Risks 34 BlackBerry Classic BlackBerry Leap Operating System BlackBerry 10 OS BlackBerry 10 OS Disadvantages • Long surpasses the average lifespan of a smartphone in the current market • Sales did not increase since release • Features might not as suitable as Passport to meet the clients’ needs • Limited the varieties of apps, which decrease its attractiveness
- 36. BlackBerry’s Current Product_____________________________________________________________________________________________________________________________________________ Analysis| Alternatives | Recommendations | Implementations | Risks 35 BlackBerry Leap BlackBerry PRIV BlackBerry Passport BlackBerry Classic
Editor's Notes
- #4 IoT: Allow machinery or any objects to transfer date over a network with the use of a IP address BBM: proprietary Internet-based instant messenger BES12: allow organizations to transfer information securely through different devices Market segments: Corporate and Governments be more detail
- #6 Product differentiation: Unlike other companies, customer buys our products (both software and hardware) to meet their specific needs, such as keypad and security features Patents: Our security technology is hard and costly to imitate, which creates barrier to enter to this market Customer-centric We are able to collaborate and customize products to meet the enterprise needs. As for hardware, we provide exceptional after-sales services to fulfill our customers’ needs Quality High quality control both on software and hardware to prevent any information breach
- #8 Small market share leads to a decrease amount of customers using the applications Small market share, small amount of customers using the applications
- #9 BlackBerry systems is not developed enough to have monetarized incentive for developers to create apps for BB.
- #10 BlackBerry slowly reduce the OS10 device production (Q10, Z10, Z30, Passport, and Classic)
- #11 Change this slide.
- #12 How does low profit margin leads to reduce sales?
- #13 Partner with Software Company to gain knowledge and increase customer reach Reduce hardware services Improve adoption of BBM means increase the market share of BBM
- #15 WHY? Due to its low profit margin
- #16 HOW? Priv is under Android System, which is currently popular for the mainstream market. Will remain a sustainable relationship with Google to help its potential growth. It also improve current situation with a lack of app. By reducing the hardware services, it will minimize the cost associated with its inventory. FIND THE PRICE OF PASSPORT - $600 compared to a $1,000
- #17 Inventory turnover: http://www.gurufocus.com/term/InventoryTurnover/BBRY/Inventory%252BTurnover/BlackBerry%2BLtd RESULT
- #19 WHAT? Data intelligence: allow enterprises to use their internal data to analyze their own operation for better decision making Remote diagnostics: Identify the problems immediately even you are at a distance Over-the-air software update Asset Tracking
- #20 WHY? Software has a high gross margin of 80% Potential growth of 3.8 million in 2014 to 2016 (WHAT IS IT? WHERE IS THE SOURCE) IoT requires a high technology of security to prevent information breach, which creates a business opportunity for BlackBerry
- #21 HOW? According to McKinsey analysis, IoT has a total of potential economic impact of 3.9 trillion to 11.1 trillion a year by 2025. And by factories itself, which is focusing operation management and predictive maintenance, it generates 30% of the total potential revenues.
- #22 LONGER TERM IN THE FUTURE
- #24 After short-term
- #27 TABLE OF CONTENTS
- #33 http://www.chartblocks.com/en/blog/post/most-popular-chat-apps
- #34 http://www.businessinsider.com/connected-home-industry-growth-2014-11