Latest / Bloomberg Intelligence / Bloomberg's Butler on Blackberry: Shrinking to Grow (Audio)

Transcript

Bloomberg's Butler on Blackberry: Shrinking to Grow (Audio) · Bloomberg Intelligence

• 0:03
  Speaker 1: Global business news twenty four hours a day. If Bloomberg
• 0:06
  Speaker 1: dot com, the Radio plus mobile app and on your radio.
• 0:10
  Speaker 1: This is a Bloomberg Business flag from Bloomberg World Headquarters.
• 0:14
  Speaker 1: I'm Charlie Pellant, the Donald, the SMP Nestack all advancing oil.
• 0:17
  Speaker 1: The big story. Today's crude oil surging four percent right
• 0:21
  Speaker 1: now talking about West Texas Intermediate. Let's said right over
• 0:24
  Speaker 1: to the first word Breaking news desk for today's afternoon call.
• 0:27
  Speaker 1: A lot going on all about oil. And here's Bill Maloney.
• 0:31
  Speaker 1: Good afternoon, Charlie. MANUUS averages jumped into day on news
• 0:35
  Speaker 1: of that OPAQ production cut. Dow is currently hired by
• 0:38
  Speaker 1: eighty two point, sesamees Game eight and AzaC is hired
• 0:41
  Speaker 1: by six. The small cap six D is up four
• 0:43
  Speaker 1: points send the US ten yield at one point five
• 0:46
  Speaker 1: seven percent. Seven out of eleven sub sectors are higher,
• 0:49
  Speaker 1: led by gains and energy, Materials, and the industrials Telecom, utilities,
• 0:53
  Speaker 1: healthcare and consumer staples fell down. Transports are up fifteen,
• 0:58
  Speaker 1: utilities are down three as a biotext fall, and the
• 1:02
  Speaker 1: Vicks drops three point seven percent. Leaders to the upside
• 1:05
  Speaker 1: in the down include Exon Mobile Caterpillar and Chevron, while Nike,
• 1:09
  Speaker 1: McDonald's and Coca Cola led to the downside. Another news
• 1:13
  Speaker 1: like California State Treasurer sanctioned Wells Fargo for twelve months
• 1:17
  Speaker 1: and Tempera Cilly plunged after cutting your sales forecast, while
• 1:21
  Speaker 1: Murphy Oil serves as much as eleven percent amid gains
• 1:25
  Speaker 1: and energy live from the first breaking news to ask
• 1:27
  Speaker 1: im Bill Maloney, l all right, thank you very much,
• 1:29
  Speaker 1: Bill Maloney, and again Crude Oil West Texas in the
• 1:31
  Speaker 1: media four percent to hear live breaking news over your
• 1:35
  Speaker 1: Bloomberg type squawk on your terminal squ a w K.
• 1:39
  Speaker 1: I'm Charlie Paullattat's a Bloomberg business flash. You're listening to
• 1:44
  Speaker 1: taking stock with Bim Box and Kathleen Hayes on Bloomberg Radio. BlackBerry,
• 1:51
  Speaker 1: maybe we should play a dirt for BlackBerry. Of course,
• 1:54
  Speaker 1: BlackBerry was synonymous at one time with mobile communications, famous
• 2:00
  Speaker 1: for their cell phones that have the physical peopoards. Well,
• 2:05
  Speaker 1: you have a nickname for it, good, that's good. Many
• 2:08
  Speaker 1: named Many named them crackberries. Right now. Today it announced
• 2:13
  Speaker 1: that they have decided to stop making their own devices
• 2:18
  Speaker 1: other companies, perhaps through licenses and some one will still
• 2:21
  Speaker 1: make some of those products with their BlackBerry name is
• 2:25
  Speaker 1: still imprinted. But imagine taking such a consumer brand like that,
• 2:28
  Speaker 1: and what's well, you know, here to tell us how
• 2:31
  Speaker 1: this all happened is John Butler. He is our senior
• 2:34
  Speaker 1: telecoms analyst for Bloomberg Intelligence, and he knows that I
• 2:37
  Speaker 1: stopped him almost every day to bother him about BlackBerry.
• 2:40
  Speaker 1: So go ahead, tell us all about BlackBerry. Another one
• 2:44
  Speaker 1: bites the dust. And it's a it's a tough market.
• 2:47
  Speaker 1: It's it's really in many ways a ruthless market. If
• 2:50
  Speaker 1: you begin to lose that momentum in the consumer marketplace,
• 2:55
  Speaker 1: it really can spell disaster. Look at Nokia, look at
• 3:00
  Speaker 1: it to rolla now BlackBerry, but CEO John Chen I
• 3:04
  Speaker 1: think is making the right move to restore the company
• 3:07
  Speaker 1: to profitability. If you look under the hood here, you know,
• 3:12
  Speaker 1: devices were over thirty one of revenue and only twelve
• 3:17
  Speaker 1: percent of gross margin. Software is forty one percent of
• 3:22
  Speaker 1: revenue in the latest quarter and fifty seven percent of profits.
• 3:26
  Speaker 1: So that's just like that, that's where the I mean
• 3:28
  Speaker 1: the stock is today right the stock right now is
• 3:31
  Speaker 1: up more than five and a quarter percent, where eight dollars. Yeah,
• 3:35
  Speaker 1: So it's it's all about that transition to software and
• 3:38
  Speaker 1: security for them. So then give us a sense like
• 3:41
  Speaker 1: if it's a pie okay Blackbreys of pie the business
• 3:45
  Speaker 1: and one big piece of the pie has just gone away.
• 3:49
  Speaker 1: It's it's like in Indonesia, now license to make that
• 3:52
  Speaker 1: they put their name on that kind of device. What's
• 3:55
  Speaker 1: left and how much is it worth? How big is
• 3:57
  Speaker 1: this company now or this pie apple? Well, the river
• 4:00
  Speaker 1: the revenue Pie is smaller by thirty percent, but the
• 4:06
  Speaker 1: profit pie is smaller by only about twelve percent. And
• 4:10
  Speaker 1: that's really the key here at Kathleen is they're shrinking
• 4:14
  Speaker 1: to grow, if you want to think of it that way.
• 4:17
  Speaker 1: That's the strategy, shrink to grow and transition over to
• 4:21
  Speaker 1: that security and software business enhance. That's they're still going
• 4:25
  Speaker 1: to license the name. Uh, they're going to monitor quality
• 4:29
  Speaker 1: control and specs obviously because their name is going there. Um.
• 4:33
  Speaker 1: But they're really out of the business of designing and
• 4:36
  Speaker 1: manufacturing in house. They got a lot of competition in
• 4:39
  Speaker 1: the new areas that they want to grow in and
• 4:42
  Speaker 1: nobody is standing still. No one is staying still. So
• 4:45
  Speaker 1: what are they doing? What are they doing that's working
• 4:47
  Speaker 1: for them, and where do they need to get, you know,
• 4:50
  Speaker 1: a little bit more action. BlackBerry always hangs their hat
• 4:53
  Speaker 1: on security. They really have done quite well there and
• 4:56
  Speaker 1: they have a lot of patents in that portfolio continues
• 4:59
  Speaker 1: to rows. So in software, the model is to to
• 5:04
  Speaker 1: move to a recurring revenue model as opposed to what's
• 5:07
  Speaker 1: called perpetual license that one time pay. So they're looking
• 5:11
  Speaker 1: for that annualized revenue stream and they're selling proposition is
• 5:16
  Speaker 1: we have the best security in the business, particularly at
• 5:19
  Speaker 1: the device level. So I think they're gonna do. That's
• 5:23
  Speaker 1: why they hung on in the device business. They hung
• 5:25
  Speaker 1: on to the software and security piece and they're just
• 5:29
  Speaker 1: moving the design and the manufacturing of the hardware outside
• 5:33
  Speaker 1: of that. How do they make money at that point?
• 5:35
  Speaker 1: Like if you're just licensing and that all comes like
• 5:38
  Speaker 1: either you running the Snapdragon ship from fall Calm or
• 5:42
  Speaker 1: that that all built into that prices that it is.
• 5:45
  Speaker 1: In fact, what's interesting, what's good about the deal for
• 5:49
  Speaker 1: BlackBerry is no matter who's selling the device or at
• 5:52
  Speaker 1: what price, BlackBerry makes a pre negotiated or a set
• 5:57
  Speaker 1: price on that royalty on a per device base. Okay,
• 6:00
  Speaker 1: is there any cautionary tale in what happened to BlackBerry
• 6:05
  Speaker 1: totally the leader at one time, Apple comes up boom,
• 6:07
  Speaker 1: and you know, Samsung and Android. For any other you know,
• 6:11
  Speaker 1: mobile makers out there, I think the key is, more
• 6:15
  Speaker 1: than almost any other tech market, you really have to
• 6:19
  Speaker 1: keep your finger on the pulse of what people want
• 6:22
  Speaker 1: and where the technology is headed. So with BlackBerry, I
• 6:26
  Speaker 1: think they lost sight of the importance of apps as
• 6:30
  Speaker 1: they were beginning to gain traction. After the iPhone was introduced.
• 6:35
  Speaker 1: That really was the beginning of the end for them.
• 6:37
  Speaker 1: To them, they looked at it and said, we're all
• 6:40
  Speaker 1: about security and we're all about push email. That's the
• 6:43
  Speaker 1: only app that people really need or are really gonna want.
• 6:47
  Speaker 1: And they were wrong on that, and they weren't paying
• 6:49
  Speaker 1: attention to that growing momentum behind the iPhone and why
• 6:54
  Speaker 1: that momentum was growing. It was all about apps. So
• 6:57
  Speaker 1: neither Samsung or Apple is going to make that mistake.
• 7:00
  Speaker 1: I hope not. We'll see you know again, I mentioned
• 7:04
  Speaker 1: those names at the beginning of the segment. Think of it.
• 7:06
  Speaker 1: Nokia used to be a giant in the field, so
• 7:09
  Speaker 1: is Motorola. They're both gone now. So how about Jamni
• 7:13
  Speaker 1: is an up and comer. They've lost a little bit
• 7:16
  Speaker 1: of momentum lately. They're trying to find that next what
• 7:19
  Speaker 1: they call hero device, the one that really resonates. Well,
• 7:22
  Speaker 1: so we'll see jump, but they're always a hero. When
• 7:24
  Speaker 1: you join us on taking Stock, he senior Telecom Services
• 7:27
  Speaker 1: and Equipment analyst for Bloomberg Intelligence. I'm Kathleen Hayes. Along
• 7:31
  Speaker 1: with pim Fox. We're broadcasting live today from the Bloomberg
• 7:35
  Speaker 1: Markets Most Influential Summit at our Bloomberg World headquarters. This
• 7:40
  Speaker 1: is taking Stock, This is Bloomberg. Bloomberg. Taking Stock is
• 7:46
  Speaker 1: brought to by kone Resnick look Ahead, Gain Insight, imagine more,
• 7:50
  Speaker 1: get forward thinking advice that can help turn business possibilities
• 7:53
  Speaker 1: into business opportunities. Find out more a kone Resn dot
• 7:56
  Speaker 1: com