Software gets no respect. It's the Rodney Dangerfield of the
tech industry - always the underdog, and yet somehow, always
) has monopolized the PC industry for decades.
) control of Web search is uncontested.
) may as well be unmovable objects, and despite the perennial
threat from cloud competitors,
(ORCL) are as profitable and healthy as ever. Not exactly a tough
The hardware industry hasn't been nearly as kind to
(DELL). Chinese competitors have grabbed market share from HP,
(BIDU) has failed to dent Google. Dell and Microsoft were both
challenged by a change in consumer trends, but Microsoft has
remained afloat while Dell hasn't. Hardware isn't easy, and
(IBM) only survived the last 102 years by walking fast and carrying
a packed suitcase; the 2005 sale of its personal computer business
(OTCMKTS:LNVGY) was just the latest in a long history of well-timed
Despite this, software firms are competing for the chance to sell a
physical product - and in many cases they're jeopardizing their
software business in order to do it. Google bought Motorola in
(OTCMKTS:SSNLF) and threatening Android's neutrality. Microsoft
debuted the Surface tablets last year, and more recently purchased
(NOK) handset business; HP
now considers Microsoft a competitor
(AMZN) sells its own tablets, which routinely get top billing on
the Amazon website. Oracle bought its way into servers, and
promises clients "integrated solutions." Indeed, integration is a
word that pops up frequently these days, as everyone looks to
(AAPL) and tries to copy its approach.
(BBRY) offers us a more cautionary tale. Like Apple, it ran an
integrated business long before the model became popular, selling
both mobile devices and the software and services that ran on them.
Obviously, the outcome was quite different; BlackBerry is now
shopping for a buyer, while Apple sits on a $480 billion valuation.
Good software can't save bad hardware. Bad hardware, on the other
hand, can kill even a well-respected software product. Last week,
BlackBerry opened its instant messaging service to iOS and Android,
and the app quickly rocketed to 10 million downloads. Not bad. And
three years ago, this move might have established BBM (Backberry
Messenger) as a top mobile messaging application. Now it faces an
uphill climb against well-established competitors, a falling
subscriber count, and a deteriorating brand.
That's a shame, because both BBM and BlackBerry's Enterprise Server
are valuable products, offering security to a business world that
desperately needs it. Data has become a make-or-break asset for
corporations, and the loss or theft of that data is getting both
easier and more damaging. Bring-your-own-device has populated
offices with personal smartphones and tablets, opening the door to
potential security breaches
. BlackBerry could have positioned itself as a solution to these
problems, if it hadn't tied everything to a sinking hardware line.
Instead, it's looking like BBM and BES might go down with the ship.
has failed to turn around
has struggled since acquiring
Sun Microsystems' server business, and Microsoft was forced to
write off $900 million on the Surface RT last quarter. For years,
Microsoft didn't release Office for iOS and Android, preferring to
drive consumers toward mobile Windows products; but the only
obvious result was more business for alternatives like Google Docs.
There's a danger that, in trying to copy Apple's model, these
companies are merely repeating BlackBerry's mistake - eroding their
core business in an attempt at hardware glory. Certainly, it's hard
to argue that integration necessarily results in better products,
when Samsung holds the top spot in the smartphone market and
four of the top five tablet vendors
are OEMs (original equipment manufacturers).
At its peak, BlackBerry's hardware revenues were five times what it
earned on software and services. Last quarter, that ratio inverted
as software and services grabbed 50% of revenue. Too late, the
handset maker has discovered which side of its business is the more
valuable. As it looks for alternatives to a $4.7 billion offer from
Fairfax Financial Holdings
(OTCMKTS:FRFHF) - almost $4 billion under book value - BlackBerry
will have a hard time convincing anyone to bid on what has
essentially become a software firm in a world where software gets
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