Open letter to customers: 'You can continue to count on BlackBerry'

One analyst says 'that's silly,' and urges the phone maker to commit to enterprise network support for 18 months

Troubled BlackBerry started the smartphone marathon race ahead of the pack years ago, but has fallen well behind as it faces 4,500 worker layoffs, a $1 billion write-off for unsold smartphones and the likelihood of being sold off in parts.

To push that metaphor, BlackBerry is still in the race, but only barely, as its running shoes have worn down to shreds during its grueling climb up Heartbreak Hill.

The latest demonstration of BlackBerry's resolve in the face of improbable odds was revealed Tuesday in an open letter the phone maker posted online and that also ran in many newspapers. It's addressed to "customers, partners and fans" and assures them: "You can continue to count on BlackBerry."

The letter recounts BlackBerry's "substantial cash on hand and a balance sheet that is debt free" and describes its "best in class" security and mobile management software while calling its BlackBerry Messenger mobile messaging platform the "most engaging."

BlackBerry also admits "these are no doubt challenging times for us and we don't underestimate the situation or ignore the challenges we are facing...there is a lot of competition out there and we know that BlackBerry is not for everyone. That's OK."

The letter concludes: "We believe in BlackBerry -- our people, our technology and our ability to adapt. More importantly, we believe in you. We focus every day on what it takes to make sure that you can take care of business."

Aside from winning the blue ribbon for "best rhetoric from a downcast technology vendor in the face of disaster," the letter doesn't reveal anything that is new about BlackBerry's recent plight.

The letter is clearly addressed to customers and not investors, or even potential investors, who are aware that BlackBerry says it lost $1 billion mostly for unsold Z10 smartphones in the third quarter and faces laying off 4,500 of its 12,500 workers.

Potential investors include Fairfax Financial Holdings of Toronto, which has a preliminary deal to buy BlackBerry for $4.7 billion and take it private. Last week, the company's original founders Mike Lazaridis and Doug Fregin also revealed in Security and Exchange Commission documents that they are exploring buying all or part of BlackBerry.

That those two men might consider buying just a part of BlackBerry might sound like a shame, but it is also what is reportedly on the minds of others.

While BlackBerry does have $3 billion in cash and investments and no debt, as it reported in its third-quarter earnings report, there are also reports -- which BlackBerry has neither confirmed nor denied -- that it still has more losses to come from slack-selling smartphones.

The secure network that BlackBerry touts in its latest letter is indeed a bright spot and potentially worth $4.5 billion. It is a combination of a network operations center in Canada that connects through 500 carriers globally to enterprise-based servers running the BlackBerry Enterprise Service (BES) software.

BlackBerry claims in the letter and elsewhere that its latest version of that software, called BES 10, grew from 19,000 to more than 25,000 customers deploying and testing the software. Surely that's an important increase, but it's not at all clear whether any of the newly added customers will want to stay very long with BES 10.

But an important concern with BES 10 is that while it is able to manage iOS and Android devices as well as BlackBerry devices, it doesn't have the full management capabilities over iOS and Android devices that it has with BlackBerry smartphones. That distinction leaves an IT shop with an abundance of bring-your-own-device (BYOD) users who want to use iPhones and Android phones at work at a potentially weaker position than if the IT shop purchased a mobile device management platform from a third-party vendor. These MDM companies are focused heavily on iOS and Android, and even on Windows Phone, ahead of BlackBerry.

Another bright spot for potential investors is that BlackBerry has patents that could be worth up to $3 billion, but that's hardly something that would matter to many BlackBerry customers. Having BlackBerry patents would assure a future entity that it could seek license revenues with those patents or potentially bar competitors from moving ahead with BlackBerry technology.

BlackBerry in its letter even touts its new smartphones as offering the best range of devices for "getting things done." The Z10 and the Q10 got rave reviews from critics for many their functions, including user interface innovations, but neither has garnered the kinds of sales that BlackBerry needs. Meanwhile, Samsung and Apple, among others, keep releasing smartphones that trump BlackBerry's -- phones with more powerful processors, or processors on 64-bit computing, and with unusual features like a fingerprint sensor for security.

The effect of BlackBerry's falling behind in consumer-pleasing smartphone features has been truly devastating despite the Blackberry's advantages for the enterprise. As Bob Egan, an analyst at Sepharim Group, put it on Tuesday, BlackBerry's supportive enterprise base of users has been isolated from the rest of the smartphone competitive ecosystem.

"What BlackBerry said [in its open letter] was 'trust us, we have cash and no debt.' In the face of delayed product launches, massive writedowns and competitively orphaning its enterprise base for years, [that] just seems silly," Egan said.

Egan and other analysts said that customers must notice that BlackBerry's open letter doesn't mention that the company has put itself up for sale, and instead has used terms like "restructuring" and "making the difficult changes necessary to strengthen BlackBerry."

Egan said BlackBerry's letter could have been more direct, pointing out that many companies count on the reliability, security and performance of the BlackBerry network operations center. BlackBerry should have assured customers that BlackBerry will commit to upholding or improving on its service level agreements with its large customers. He even urged BlackBerry to say it will remain connected over the secure network with its 500 carriers partners for another 18 months, at least.

One statement made in the open letter -- that BlackBerry has the best security of any phone out there -- rang true to Patrick Moorhead, an analyst at Moor Insights and Strategy. Meanwhile, he added, "it's a bit of a stretch to say they have the best MDM and enough cash to survive on their own."

The problem with emphasizing BlackBerry's security is that saying so overlooks its lapses in building cutting-edge smartphones. And that raises the question of whether BlackBerry can continue to survive as a company that supports customers primarily in government and financial institutions, which are mainly interested in BlackBerry's secure network.

While it might seem the latest BlackBerry line of smartphones has little potential interest for buyers, Computerworld found a customer who last week purchased a new Z10 smartphone over the Verizon Wireless network. While he didn't give permission to use his name, the customer lives and works in Virginia and holds a technical quality assurance job in the medical field and plans to use the Z10 for work and personal tasks.

"I like it," he said, while thumbing through features on the Z10's touchscreen. Asked if he's worried about troubles for BlackBerry, he said he's bought products from companies that have "gone under" before and has found he's gotten plenty of continued support. "It's not a problem."

One analyst, Carolina Milanesi of Gartner, said that while Gartner has advised its enterprise clients to find alternatives to BlackBerry in the next six months, it was valuable for BlackBerry to issue its open letter.

"It was time they actually said something to their customers," she said. "Will it make a difference? Probably not -- meaning that enterprises will be looking for an alternative sometime down the line. But it is good customer service to assure your customers that despite what is going on, it is business as usual when it comes to their level of support."

Tags BlackberryMobile/Wirelessconsumer electronicsNetworkingsmartphoneswirelessmobile

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Matt Hamblen

Computerworld (US)

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