BlackBerry's Hardware Hail Mary: 4 Challenges

Is BlackBerry's Passport smartphone a triumph for keyboard loyalists? Or BlackBerry's last hurrah in hardware?

some reviewers with pre-release access to the device have opined that touchscreen keyboards are actually faster and more comfortable.

The keyboard is not as potentially troubling as the Passport's square screen, though. Even spreadsheet power users like to play games or watch movies occasionally on their phones, and the Passport aspect ratio is a clear compromise.

2. Almost no one makes money-making smartphones.
BlackBerry execs admit that the Passport isn't a mass-market product, yet CEO Chen told The New York Times that, if the company's hardware efforts aren't profitable, the company will stop making phones. Is Chen effectively admitting that the Passport is a last-ditch effort before the company focuses entirely on software and security products? It's hard to imagine BlackBerry making much money from its newest phone.

To be profitable in the smartphone market, a company generally needs to sell a lot of high-margin devices -- which is why Apple is the only company that's any good at squeezing money out of smartphone manufacturing. It's also why most smartphone OEMs position their devices as ecosystem plays, in which low- or negative-margin device sales are offset by high-margin tangential benefits, such as user subscriptions to mobile services.

For BlackBerry, the Passport's $599 unlocked cost doesn't imply outstanding margins. The cheapest iPhone 6 model costs only $50 more, but BlackBerry, as a low-volume smartphone player, doesn't have anywhere near Apple's clout among component suppliers and manufacturing partners. Chen told the NYT that BlackBerry has attempted to limit costs by using some commodity components found in the majority of smartphones and by forging new relationships with manufacturers. But even if BlackBerry is controlling costs, it could struggle for volume (see item 4 for more).

3. Even enterprise professionals like apps.
The Passport's square screen isn't ideal for those who run lots of apps. The operating system doesn't help matters. It has access both to native BlackBerry apps and to Android apps available through Amazon's app store -- but apps written for typical, rectangular smartphone screens aren't going to scale well. Moreover, because BlackBerry 10.3 doesn't have access to the full Google Play catalogue, many popular apps aren't available. Is BlackBerry the only smartphone player that realizes some users care more about physical keyboards than smartphone apps? Or has the company forgotten that even serious-minded enterprise professionals become regular consumers outside of business hours?

This issue has farther-reaching problems, as well. iPhones are popular at work because the iOS app ecosystem evolves so rapidly. The iPhone's work value isn't just due to Apple's OS and product design; it's also due to the many contributors who are constantly building new apps for the platform. With less developer investment, the Passport experience is less likely to add new ideas over time.

4. The professional market has spoken.
If there's one fatal flaw in BlackBerry's approach, it's this: Many of the professional users whom the Passport targets are the same people who helped iOS rise to prominence. iPhones are relatively affordable today, but the devices launched at higher prices are still most popular among affluent customers. There's meaningful overlap between the high earners who've continued to buy iPhones and the professionally minded demographic that BlackBerry hopes to reach. After all, BYOD programs started partly because executives wanted IT departments to support their new iPhones and iPads. Given that many enterprise workers have made clear their preference for modern smartphone experiences, can BlackBerry possibly lure back enough users?

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