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Nadir Mohamed (left), president and CEO, Rogers Communications, and Thorsten Heins, president and CEO, BlackBerry pose with Z10 devices at a Rogers store in Toronto on Feb 5, 2013. (Fred Lum/The Globe and Mail)
Nadir Mohamed (left), president and CEO, Rogers Communications, and Thorsten Heins, president and CEO, BlackBerry pose with Z10 devices at a Rogers store in Toronto on Feb 5, 2013. (Fred Lum/The Globe and Mail)

The BlackBerry comeback that wasn’t Add to ...

It was the product that was supposed to revive the fortunes of a Canadian icon. Instead, it only cemented the company’s decline.

When BlackBerry Ltd. launched its long-awaited new smartphone back in January, it was presented as a game-changer, a device that would silence critics, thrill fans and win back consumers who had defected to competitors.

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Monday’s announcement that the company is pursuing “strategic alternatives” for its future, including a possible sale, is a tacit admission that the turnaround plan isn’t working.

In late June, the company announced that it had shipped only 2.7 million of its new BlackBerry 10 devices in its fiscal first quarter, a figure that fell far short of analyst expectations.

The disappointing performance of the BlackBerry 10 lineup means that the company can no longer deflect hard questions about what’s next. After a major management shuffle last year, BlackBerry engaged bankers to conduct a strategic review but shied away from big changes ahead of its gamble on the new smartphones.

Timothy Dattels, who is heading up the company’s special committee, said BlackBerry has put its focus on launching the BB10 over the past year.

“Given the importance and strength of our technology, and the evolving industry and competitive landscape, we believe that now is the right time to explore strategic alternatives,” he said in a statement.

While there were minor missteps with the launch, experts said, the product and its new operating system were well executed. But they were late to arrive and weren’t revolutionary enough to reverse the impression that BlackBerry was a niche player being left behind by behemoths such as Apple Inc. and Samsung Electronics Co. Ltd.

“It’s like clawing your way out of a sandpit,” said Maribel Lopez, a mobile technology consultant based in San Francisco. “They’re in the unenviable position where they have an extremely solid device and solid isn’t enough.”

At the end of June, BlackBerry reported that its user base fell to 72 million, the third decline in as many quarters. Its share of the global smartphone market dropped to just 2.9 per cent in the second quarter of this year, according to research firm IDC, the lowest figure ever for BlackBerry.

Back in January, Thorsten Heins, BlackBerry’s chief executive, unveiled the new Z10 smartphone at an event held on a pier in Manhattan, complete with an appearance by singer Alicia Keys.

But the product wouldn’t be available in the critical U.S. market for another two months, a delay that allowed some of the excitement from the launch to dissipate.

When the Z10 – a smartphone with a touchscreen but no keyboard – did start selling in the U.S., the immediate response from U.S. consumers wasn’t exactly rapturous.

BlackBerry defenders noted that the company relies on corporate customers, which doesn’t translate into long lines outside stores ahead of new product launches.

Yet consumer enthusiasm is still critical. At companies, chief information officers are “willing to embrace the BlackBerry but the employees have already moved on,” said Charles Golvin, a technology analyst at Forrester Research.

By the time BlackBerry’s new devices reached the market after repeated delays, those executives had already responded to “the groundswell of demand from employees saying, ‘I want to use the iPhone, I want to use Android,’” said Mr. Golvin, referring to the popular operating system created by Google Inc.

Other analysts echoed that conclusion, asserting that BlackBerry’s fundamental mistake was one of timing. Producing “technologically fashion-forward” handsets at relatively elevated prices would have been a great idea two years ago, said Michael Morgan, an analyst at ABI Research.

“Now we’re at a second inflection point,” he said. “Everybody already has a high-end phone and the people that don’t want cheaper things.”

In the smartphone market, BlackBerry brought a knife to a gunfight, experts suggested. Unlike its competitors, it cannot marshal an enormous marketing budget. And because its market share is small and growing smaller, it doesn’t command the same kind of attention from the developers of software applications.

Analysts at Canaccord Financial said in a note last month that their surveys suggested “very soft” U.S. sales for the Z10 and its successor, the keyboard-equipped Q10, plus “sharply declining” sales of older BlackBerry models.

“We struggle to envision how BlackBerry can sustain a completely different mobile ecosystem with limited carrier support, developer interest or application base,” they wrote. “We believe… its smartphone market share will remain below 3 per cent for all of 2013.”

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