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Invasion of the Brandsnatchers: How Nokia and BlackBerry inhabit the afterlife

Ghosts in the Machine

Analysis Early next year you should able to buy Nokia phones and BlackBerry phones, two of the giant names of the Noughties. None of these phones will be made by Nokia or BlackBerry, and all of them will be Android phones. The famous brands will inhabit new bodies, with the licensees hoping to rekindle some nostalgia both giants once enjoyed.

Yesterday BlackBerry formally announced that its Mobility division would become a software and brand licensing operation, putting in an end to an 18-year adventure making and selling its own devices. We’d predicted this back in July – and it was one of the easier guesses to make: CEO John Chen dropped such a heavy hint in New York, you could hear it go clang in Patagonia.

The respective licensing arrangements are not quite alike. BlackBerry continues to create (and presumably certify) a firmware ROM, like CyanogenMod, but deeper and more focused. BlackBerry’s Android isn’t based on the generic Linux, but a hardened Linux. By contrast, Nokia’s new custodian starts with a tabula rasa.

The new Nokias will be made by a new venture called HMD, which is owned by a private equity fund. The first licensee for BlackBerrys is in Indonesia, a vehicle which received investment from the country’s major mobile operator. Neither Nokia nor BlackBerry will take stakes in their licensees. Nokia’s new phone maker hit the ground running, with a $500m investment, and the distribution network for cheap feature phones that it acquired from Microsoft.

TCFKAR* had almost (but not completely) made the transition already, with the most recent BlackBerry being a TCL-design DTEK 50 running BlackBerry’s “hardened” Android. A swankier model is imminent. As Chen told analysts, the change in strategy means the licensee will now bear the burden of logistics and repairs, not BlackBerry. And he could have added, the licensee will probably have to bear the cost of promotion too.

(Since nobody asked, nobody at BlackBerry volunteered to explain whether or not the brand owner would help to continue to market the BlackBerry brand. Would there be MDF (market development funds) available, or promotions? Long-suffering BlackBerry loyalists may snark that if you consider how effective BlackBerry’s marketing has been in recent years - with Alicia Keyes and a notorious SuperBowl ad - BlackBerry marketing was “help” the licensee could live without).

We’ve discussed Nokia’s demise so many times over the years, there’s little to be added. RIM/BlackBerry had less far to fall, but it was still a staggering one-way path. Both companies lived in a bubble. Both were like the Wile E Coyote after he’d gone off the cliff, still suspended, but running furiously. The market was still growing, remember, but Nokia and BlackBerry were an increasingly irrelevant part of it.

While Nokia was flinging uncompetitive touchscreen devices at a market which still gave it the benefit of the doubt, at least for a while, BlackBerry’s decline was masked by huge volumes in the consumer market, amongst teenagers and in developing markets. Revenues and subscriber revenues increased, throughout 2010 and 2011. In fact, service activation fees (SAFs) peaked in 2013, after BlackBerry had introduced its BB10 platform. The SAF was a recurring fee paid by a mobile operator to BlackBerry for provisioning the special BlackBerry SIM, and using BlackBerry’s network. BB10 phones required no special SIM. All this meant RIM’s headcount grew even as its market share in the most lucrative markets fell.

I recall doing a recce of High Street phone shops a couple of weeks after BB10’s expensive "comeback" launch, early in 2013, and the shops were still jammed with the promotional material. But nobody had touched the phones – interest was almost completely non-existent, and it was clear this was going to be a multi-billion-dollar catastrophe. There wasn’t going to be a way back.

The only remarkable thing about BlackBerry’s exit is not that it happened, but that it didn’t happen earlier. A ruthless CEO would have taken the hit in one big go, shedding the unit in a firesale, and foregone launching the striking BlackBerry Passport and later, the Priv. Why did Chen decided to keep selling phones as long as he did? The corporate backlash against BYOD (CYOD is more common now) was just starting to manifest itself, but BlackBerry couldn’t catch the wave. Or maybe there were no buyers; sometimes a company’s failing asset requires so much expense you can’t pay people to take it off your hands.

Now you have the chance to design the BlackBerry you want – just drop Waterloo a line with a serious proposal. ®

* The Company Formerly Known As RIM

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