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This is BlackBerry’s biggest problem

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The non-cell phone version of BlackBerry (BlackBerry Stock Quote, Chart, News, Analysts, Financials TSX:BB) has some interesting offerings, but there is one big problem.

That’s the opinion of Morningstar Editor Andrew Willis, who in a July 8 piece gave an overview of the current state of affairs for the beleaguered former Canadian tech giant, now trading near all-time lows.

“BlackBerry has carved out quite the business in automotive software with applications for automotive chips, safety systems, and vehicle cabin features. We see its enterprise business, however, as weighing on results as the company competes with larger enterprise security incumbents. And the challenge there for BlackBerry largely comes from switching costs.”

That’s it. Switching costs. It’s one of those things we subconsciously consider every day with many of our own purchases. But what are they, exactly?

“Switching costs are the costs that a consumer incurs as a result of changing brands, suppliers, or products. Although most prevalent switching costs are monetary in nature, there are also psychological, effort-based, and time-based switching costs. Switching can also refer to the process of rebalancing or changing investments,” says Investopedia.

“With more companies offering comprehensive suites of software that require fewer people in IT to implement, the switching costs in the sector have taken a tumble,” Willis wrote. “Morningstar equity analyst William Kerwin says that BlackBerry’s largest competitors in endpoint management have moats, but we think these result from comprehensive portfolios of endpoint solutions and that the fragmented $3 billion unified endpoint management market is not enough on its own to bestow a moat on BlackBerry, despite the company having an impressive market share.

Could BlackBerry overcome this obstacle? Maybe, the author says.

“We do see some moatworthy characteristics in BlackBerry’s QNX automotive business, however, but the switching costs are an issue here as well,” Willis concluded. “Currently, car infotainment systems haven’t gotten so complicated that they have become mission-critical for automakers—although with the emergence of autonomous vehicles, that could change.”

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