9 April 2017

The Terminal Decline Of BlackBerry

by Felix Richter

Econintersect note: We have added a discussion of the history and current status of Blackberry stock (NASDAQ:BBRY) at the end of this note.

In the fourth quarter of 2016, BlackBerry has hit another milestone in its steady decline from "Crackberry" (so addictive was the use of its phones) to a place in the gallery of failed phone manufacturers.

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According to Gartner, BlackBerry sold just 207,900 devices running its own operating system between October and December, putting the company’s market share at 0.0 percent (or 0.048 percent to be exact).

Prior to the iPhone’s launch in 2007 and the subsequent surge in smartphone sales around the world, BlackBerry phones were immensely popular for their secure messaging and email functionality, especially among professional users. The company never quite managed the transition to smartphones successfully though, and after several strategic shifts announced in September that it would no longer make its own phones.

That won’t be the end of BlackBerry phones though, as the company reiterated in a blog post published in December. The company is merely shifting all of its efforts to software and plans to work with third-party phone manufacturers in keeping the BlackBerry platform alive (or bringing it back to life for that matter).

This chart shows the decline of BlackBerry's market share since 2009.
You will find more statistics at Statista.

Note added by Econintersect: BlackBerry (NASDAQ:BBRY) is a classic "bubble stock", rising from an IPO price of US$0.85 (split and exchange rate adjusted) when going public as Research in Motion (TSX:RIM) in October 1997. It traded in New York as (NASDAQ:RIMM). (The company was renamed BlackBerry Limited in 2013 and the ticker was changed.) The company introduced its first BlackBerry product, the BlackBerry 850 pager, in 1999, followed by the first BlackBerry smartphone (BlackBerry 957) in April 2000.

The chart below shows the epic bubble rise and fall for RIMM-BBRY, starting in early February 1999 when the stock began trading on the NASDAQ exchange.

But, after all that drama, someone who got the stock at IPO is still up 782% if they held the stock today. That is an annualized gain of 11% or $7,820 for every $1,000 invested.

But if anyone is in that situation, they would probably complain about the $119,000 they could have had if only they had sold at the peak. Unless of course the stock today is the residual from an initial investment of $10,000. If the other 9,000 shares had been sold at the peak this lucky individual would have had a gain of more than $1 million in addition to the residual stock worth $7.75 a share today.

Of course, people don't sell stock at the peak. But if someone had followed a systematic sell program from throughout the years 2007-2010, they would have realized a gain near $500,000, and that is not such an unrealistic outcome.

Lesson? When you ride a rocket into space it is wise to start making an exit well before the fuel is gone. Since investors can't expect to see the fuel gauge for a high-flying stock, start taking profits when you have a big gain, nibbling away at the total investment in a systematic way, like the reverse of dollar-cost-averaging purchases. Or, alternatively, sell some small percentage of stock held every month or quarter over a period of a few years.

When a stock has made you rich, never give it a chance to make you poor.

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