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How Did Once-Addictive Blackberry Fall Behind Other Smart Phones?

September 24, 2013 at 12:00 AM EST
At the top of its game, Blackberry was the world's most popular mobile device, but now the struggling smart phone maker has announced a $4.7 billion buyout. What mistakes did Blackberry make that its competitors got right? For insight, Jeffrey Brown talks to Farhad Manjoo of The Wall Street Journal.
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JUDY WOODRUFF: Next: the end of an era for an embattled smartphone company.

Last week, BlackBerry announced that it was facing a huge loss due to unsold devices and that it would lay off about 40 percent of its already reduced work force. And, yesterday, it said it had signed a tentative agreement to be purchased and taken private.

The deal, with a group led by BlackBerry’s largest shareholder, amounts to $4.7 billion.

Jeffrey Brown has our story.

JEFFREY BROWN: Huge problems today, but it’s not that long ago that the term “CrackBerry” was coined because so many people were not only using, but were seen as hopelessly addicted to the company’s mobile devices.

So what happened?

We asked Farhad Manjoo, technology columnist in for The Wall Street Journal.

Well, Farhad, what’s the answer? Why did people stop buying BlackBerrys?

FARHAD MANJOO, The Wall Street Journal: Well, the short answer is the iPhone.

Apple created this device that proved to be really popular and immediately changed the entire smartphone industry. Before the iPhone came along, devices that had hardware keyboards like the BlackBerry were the most popular smartphones. And they were mostly sold to big companies and used in businesses.

The iPhones sort of changed that marketplace because it was sold to consumers, and it became this really fun, attractive device that lots of other companies tried to mimic. And BlackBerry sort of lost out in that new market.

JEFFREY BROWN: And just give us some perspective. Where was BlackBerry, say, five years ago in that market?

FARHAD MANJOO: BlackBerry was the most popular smartphone-maker.

Across the world, its market share was in double digits, and it was really profitable and doing really well in the stock market. It was the equivalent of — as successful a tech company as it’s possible to be, that was BlackBerry, sort of at the top of its game around the time the iPhone came along.

JEFFREY BROWN: So, when people look and talk about what happens to a technology company that goes from the leader and drops, in this case, what was it? Was it just a bad bet on who it would be popular with, or what happened?

FARHAD MANJOO: I think what happened is complacency.

BlackBerry had become really addicted to kind of a single way to sell its devices. The way that it sold its devices was that it had relationships with I.T. managers at big companies, and those I.T. managers kind of issued BlackBerry’s phones to their employees.

And that was a really easy way to sell phones because I.T. managers have a — sort of a limited set of needs. They need secure phones, but they didn’t really need flashy phones. They didn’t really need phones that ran a lot of apps. In fact, they wanted phones that didn’t run a lot of apps because that made them more secure.

The — kind of the market changed because — and BlackBerry didn’t recognize it — when the iPhone came along and Apple and then later devices running Google Android operating system began to sell sort of directly to consumers. And those consumers have jobs, and they didn’t want to use the phones that their companies were providing for them.

So their I.T. managers began to let them use — let them use the devices they bought for home use. And that’s sort of how the iPhone and Android phones kind of crept into BlackBerry’s market. BlackBerry suddenly realized that its customers, the I.T. managers, weren’t the ones making decisions anymore.

JEFFREY BROWN: Well, these troubles, of course, have been going on for several years. And I know the company’s tried several things in the last couple years to try to maintain or even turn it around. But turning around for any tech company is pretty hard, right? There aren’t too many examples of that.

FARHAD MANJOO: Yes.

I mean, there’s sort of one — one example that you can think of, of a tech company that kind of hits bottom and then turns around. And that’s Apple during the ’90s, when Steve Jobs returned, and it sort of grew to become the juggernaut it is today.

But the way it did that was by kind of, you know, essentially abandoning its current market, its market at the time, which was P.C.s. You know, Apple still makes P.C.s, but what it did was kind of leapfrog that and come up with a range of devices, first the iPod and then phones and tablets, that kind of beat that market. It did something completely new.

BlackBerry didn’t really try to do that. Its whole problem is that it couldn’t and it really sort of showed no — no expertise in innovating beyond the smartphone that it had before. Often, over the last few years, it’s released several different devices that it promised would be the next big thing, and they turned out to be either middling or not so great, and not really innovative, just kind of copying what other people were doing.

JEFFREY BROWN: We’re talking about BlackBerry. We talk about Apple.

Just in our last minute, of course, another company that people always look at in this regard as being a huge leader, and then what happens, that’s Microsoft, another big player still, but still trying to find its way and its position.

FARHAD MANJOO: Yes.

I mean, and the story for Microsoft is similar. It had this huge market, the P.C., and then pretty much without its noticing — without Microsoft really noticing — the P.C. market began to go away. And now kind of the center of energy in the technology business has to do with mobile devices like phones and tablets, which Microsoft is really trying to catch up there.

They just bought Nokia. But it’s — they face the same kind of problem that BlackBerry has, which is kind of trying to get ahead in this new market that’s dominated by other players.

JEFFREY BROWN: All right, Farhad Manjoo of The Wall Street Journal, thanks so much.

FARHAD MANJOO: Thanks.