Wireless carrier T-Mobile US (TMUS) ran a promotion recently that allowed BBRY device owners to swap their gadget for the Apple (AAPL) iPhone 5s, with huge success. And even after some backlash from a few fanatics prompted T-Mobile to allow users to swap their BlackBerry phones for newer BBRY models, an internal memo showed that trade-ins of BlackBerries were up 15-fold on the promo.
Part of the rush was clearly because it was such a good deal. If you have an ancient device and can get an iPhone 5S for zero down, why not?
And judging by the fact that BBRY stock is up more than 35% year-to-date in 2014, investors seem to think that woes in the consumer business are either already baked in or a non-issue as BlackBerry focuses on enterprise clients under its new CEO John Chen.
But it’s still a big, black eye to see that many users eagerly running for the exits.
It might be valid to say that in regards to BBRY stock and BlackBerry investors, the news doesn’t matter much. Apple gadgets and mobile devices that run Google (GOOG) Android software have already squeezed BlackBerry’s market share down to almost zero. And lately the buzz has been about BlackBerry Messenger unlocking value for BBRY stock holders after Facebook (FB) purchased mobile messaging company WhatsApp for a whopping $19 billion.
However, I wouldn’t so quickly discount consumer perception.
After all, part of the reason that Apple is so dominant is simply because people like its products. And anyone who knows an IT manager knows that Apple has wormed its way into some companies via “bring your own device” (BYOD) policies where the employees get to pick their work-related gadgets, not the company itself.
Everyone agrees that BBRY stock has little to gain from the consumer market. But I think its brand tarnish matters — particularly as Microsoft (MSFT) takes the fight to businesses and government clients to win enterprise sales for its Windows Phone line. MSFT is steadily growing market share — even if its mobile business doesn’t pack as much punch as its legacy desktop software — and has a sense of urgency to continue this mission.
About $84 billion in cash and short-term investments doesn’t hurt either.
So while you might be inclined to write off the consumer flight from BlackBerry devices as further confirmation of old news, don’t discount what it means for BBRY stock.
If people don’t like your product, there’s a chance that their boss can demand they use it … but that’s not much of a business model if BlackBerry wants to keep its devices and software respectable in the eyes of Wall Street and IT managers alike.
After laying off 4,500 employees and focusing squarely on enterprise and government clients to keep its struggling business afloat, BlackBerry has no margin for error. And while a more than 35% pop in 2014 for BBRY stock is nice, investors should be looking for positive news to drive shares higher and prove this is more than just a dead-cat bounce.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP.