What's a BlackBerry user worth?

Last week BlackBerry announced that it had 72 million subscriber accounts. The current market capitalization is $5.4 billion and enterprise value (i.e. excluding net cash) is about $2.8 billion.

That implies a net present value of about $40 for each account. This is quite a drop from early 2010 when the value was $866.

The graph of BlackBerry subscriber accounts and EV/account is shown below:

Screen Shot 2013-07-01 at 7-1-10.09.16 AM
I’ve also added a graph showing a derived value of US consumer BlackBerry users (derived from comScore’s survey data).

There are several patterns which intrigue me:

First, the peak in US consumption seems to have happened about two years prior to global peak (lending credence to the notion that the US is a smartphone market “crucible”.)

Second, that the collapse in value per user occurred in advance to the peak in users. This is, of course, linked to other user base leading indicators such as device sales momentum. But the drop indicates that there was no perceived value in the BlackBerry install base to begin with. As devices went, so did the company.

Third, this same lack of perceived value seems to be present within the Apple ecosystem (see below), where user value was cut to a third within a few months

Screen Shot 2013-06-14 at 6-14-1.13.26 PM

In the case of RIM/BlackBerry, the drop in value per user accurately foretold the drop in user base. Does the drop in value per user for Apple foretell a reduction in users?

So far, iOS user base (as proxied by iTunes accounts) continues to expand, even in the US.

Screen Shot 2013-07-01 at 7-1-10.13.02 AM


  • obarthelemy

    In the case of BlackBerry, I think the valuation acknowledged that lock-in was low:
    – almost no media content
    – few apps
    – BB was throwing away their Entreprise advantage, BB10’s Entreprise tools are below par, and that market proved both smalll and very sensitive to pressure from the Consumer side.
    – even BBM got discounted: in rich countries, data got cheap enough and Wifi ubiquitous enough for What’s App and its ilk; in countries rich and poor, BBM’s proprietary aspect means it got discarded in favor of cross-platform apps.
    – the nice keyboard only locks in few users (among which Eric Schmidt, reportedly :-p)

    In the case of Apple, I think analysts are mainly clueless. They’re looking at Apple’s past history of being unable to hang on to market share, at the competition’s competent development… You said Apple users are spending $40/yr on iTunes. That’s pocket change: between 0.5 and 3 months of Carrier service, 5-10% of the value of a premium handset… Not enough to create lock-in. Even after 3 years, throwing away $120 does not seem very painful, especially if a good part of that “investment” is obsolete and won’t be re-invested in a new platform. Or is cross-platform and will carry over (music). Peripherals and user skills are probably more of a lock-in.

    That puts the pressure back on the devices’ and apps’ price and features. No lock-in, and a more iffy proposition for Apple.

    • Kizedek

      So, in the case of Apple, what are you saying? That the analysts are clueless but wrong? That they are looking for lock-in, but judging Apple to have no lock-in, which is bad for future growth; while you think Apple does have lock-in?

      Normally, you are complaining about Apple lock-in. Interesting that some people out there seem to think that there is not enough lock-in. Who’d a thunk it?

      Make no mistake, the pressure was always on Apple’s devices, apps and features; and that is fine. As many here have repeatedly told you, repeat buying from Apple is not about lock-in, it’s about perceived value around job to be done; it’s about satisfaction. Added to that is the fact that Apple has a real platform and ecosystem that actually represents a proven and sustainable business model in mobile that is only expanding to other fields and types of media and content; and that *should* keep analysts happier than mere potential pie-in-the-sky from Google or Amazon.

      It’s not “iffy” at all, because Apple wants to create great products that people delight in. It’s only “iffy” to those who are evidently jaded and cynical as consumers.

      So, I am just wondering who is clueless, who is wrong, who is disingenuous, who is willfully ignorant, who is dishonest, who has an agenda, who is looking at the wrong history (say, Mac instead of iPod), who is myopic, who is jaded, who is cynical…? I am pretty sure you are at least two of those.

      • François

        I don’t know for sure, but we are talking about long term lifecycle value. Who knows if we really ponders 1 year, 2 year or more? Debate is open.

      • Kizedek

        Yes it is. In fact, the PC debate is still open. What’s interesting is that the “walled garden” things that Apple is doing on its iOS platform ARE about long-term stability and value, not about immediate “lock-in”…

        The irony is that the philosophically “open” crowd are all about monopoly and how the platform must “control” or at least “extend to” multiple “partner” companies, all of which must bring their hardware in line, whatever the shoddy, one-size-fits-all, race-to-the-bottom result ensues. MS achieved this for a 10 or fifteen year period, and now this is the mantra determining the way it *has to be*.

        With Android, there is no “lock-in” per se, as far as moving from one OEM vendor to another. But what gets locked in is the whole technology sector and technological innovation, to the detriment of everyone and everything. We are finally getting out from under the dark cloud of an MS monopoly; now people want Google and the inferior java-on-linux platform that it bought to define mobile computing for the future. How open.

  • Chaka10

    The decline in EV/iTunes account reflects continued growth in iTunes accounts matched with a decrease in EV. So, it’s pointing out what we all know — that AAPL share price got hammered beginning 2H 2013 even in the face of increasing iTunes accounts and exacerbated by continued growth in Apple cash hoard (since EV is net of cash…). So the question remains essentially the same as, and not new or different from, what all Apple investors, analysts and pundits have been asking — is the market right or wrong in crushing the AAPL share price even as iTunes accounts (iPhone installed base) continue to grow and the company continue to accumulate cash.

    • KirkBurgess

      I believe the point of the article is that it is suggesting the answer that the market is indeed wrong, when using the described technique of valuation (EV/users) – which Horace is suggesting provides a more accurate view of a companies harder to value attributes such as its resources, processes & priorities.

      I recommend reading Horace’s latest linked in post for further detail.

      • Chaka10

        Yes, I understand that is Horace’s implication tacitly, though he leaves us explicitly with the question: “Does the drop in value per user for Apple foretell a reduction in users?” [as it did eventually for BlackBerry…].

        To point out the obvious, you would have been wrong (and lost a chance to get out) if you had taken the view in early 2011 that the market was “wrong” in devaluing BB accounts on an EV/account basis from $80 to ~$50, when accounts were still increasing overall, and the US was yet to show clear decline (though just beginning to do so). So, to me it’s the same essential question circling back, in whatever language and by whatever metric, is Apple on the precipice of pulling a BlackBerry experience, as suggested by the decline in its EV/account or PE? I don’t think so, but that is the question, and I’m interested in (and have posted views on) analysis of how Apple is in a different situation than BlackBerry two years ago.

      • the Ugly Truth

        RE: how is AAPL different vs BBRY 2 years ago.

        I’ll give you 3….
        1. Unit sales YOY are on an uptick with AAPL…
        2. Leadership at AAPL is totally different than BBRY then or now.
        3. BBRY chose not to see the disruption; AAPL on the other hand chose to disrupt its own.

    • mieswall

      I think the point of Horace has two implicit comparisons:

      1- Apple is valued as a RIMM-kind of company, because of the *fear* of loosing customers and margins. And so, it is crushed in price, compounding the punishment because of the cash increased (and so, EV reduced), and compounded again by users growing (while those of the reference RIMM are shrinking). And he still doesn’t mention the shares reduced, that would by a kind of fourth punishment over the others, since the stock maintains same price after less dilution.

      2- Apple should be instead compared, eventually valued, like those companies building a monopolistic users base, like Amazon or Google. In the long term, Apple potential profits per user are at least as high as those, while in the meantime, they are building that base actually winning money -lots of- per device sold, not loosing it (like AMZN kindle), or throwing their efforts in unprofitable way (like Google’s android or pretended Motorola’s patents). With, at the end of the day, a higher loyalty of their users (which, obviously, market doesn’t believe).

      – All the discussion about dimishing profits of these Q’s as a way to justify a a P/E of less than 10, or a EV/share of less than 7, is simply absurd. I doubt there is one intelligent investor in Wall street that hasn’t a clear view of the future, and these Q’s as simply profit cycles. The point is that Apple IS a manipulated stock, while WS, Apple itself, and the funds that own it, found a way (a market) to finance the real value of the company (share buyback is part of this process). In the meantime, and very properly timed with a ongoing restructuring of production (less externalization, less Samsung dependant), Apple is just administering growth for a while.

    • the Ugly Truth

      RE: is the market right or wrong in crushing…

      IF AAPL’s history and the analysts’ calls over the same time frame is a good indication, it will be a matter of time before we make another high.

      The “market” has never ever valued AAPL’s earnings potential efficiently since we got out of market disruption.

      However, it seems to be so very patient with AMZN. Why is that?

      • Chaka10

        Amazon doesn’t have to face comparisons to perceived potential precedents like RIM, NOK, MOTO, SONY-ERICSSON, and even of olde AAPL itself from the PC-clone wars of a generation ago. I think tech investors collectively suffer PTSD.

      • the Ugly Truth

        Ah…that may be it.

        One thing I do admire about AMZN…insiders own almost 20% of the float.

  • the Ugly Truth

    Unless I’m mistaken…

    BBRY’s EV drop was dictated by sequential decline in units sold…
    AAPL’s EV drop is dictated by the FEAR that sequential YOY growth has peaked.

  • normm

    It’s tempting to ascribe the drop in AAPL share price to ignorance and misinformation, which is most of what I see on financial discussion boards. But most AAPL shares are institutionally owned, and these people are well informed. My thought is that AAPL stock is being manipulated in order to pump money out of small investors and into hedge funds: small investors are periodically panicked into selling low, so the hedge funds can buy in and sell higher. Then no matter how well Apple does as a company it’s hard for the stock to go up much, since everyone is anticipating the next panic.

    • the Ugly Truth

      just because they are “institutions” doesn’t mean they are “informed”.

      are hedge funds counted as “institutions”? if so, what have they done when AAPL was at $700?


      AAPL today, is valued less than IBM or MSFT. Despite dividends and buybacks.

      • KirkBurgess

        What metric of valuation are you using? Because Apples market cap valuation if worth more than those other companies you mention.

      • the Ugly Truth

        market cap valuation is driven by?

      • KirkBurgess

        If anyone knew the answer to that they would be very rich.

      • KirkBurgess

        You said AAPL is worth less than IBM, MSFT, GOOG & AMZN, but all those companies have far smaller market caps than apple does, so my question to you is what metric you are using to back up your assertion that AAPL is valued less than those other companies.

      • Chaka10

        Perhaps I’m wrong, but I understood Ugly to mean Apple is “valued less” than the companies he mentioned by conventional valuation metrics like PE: AAPL less than 10, vs IBM (13+), MSFT (~18), GOOG (26+), AMZN (+++++).

      • the Ugly Truth

        Thanks Chaka10…

      • Chaka10

        Nah, this is generally a more serious/thoughtful board. Simple misunderstanding, I’m sure. Glad if I’ve helped clear it up.

      • the Ugly Truth

        yup. hence, my surprise!

        ahh…if i had half the class that you do; I’d be the master of my own domain!

      • KirkBurgess

        Why couldn’t you have simply said you were using P/E as your metric?

        There are many ways to value a company, and market cap is completely independent of any of these valuation techniques. I hate to break this news to you, but market cap is determined by share price x amount of shares – it has absolutely nothing to do with P/E valuation.

        In fact this very article you are commenting on is talking about a completely different valuation metric to value a company – what sense is there to bring up P/E valuations?

      • the Ugly Truth

        I can only assume you may be an AAPL shareholder. Hence, I’ll hold back my usual vitriol towards presumptuous trolls and grant you the courtesy that it was merely a misunderstanding.

        First thing first…
        Did I bring up market cap? Who did?

      • KirkBurgess

        I concede I misunderstood your post when you said “is valued less” and took it literally as actually valued less, rather than what I now see as your implied intent to suggest that it is “undervalued” as compared to those other companies, which is something I actually agree with.

      • the Ugly Truth

        its all good; you showed class.

      • KirkBurgess

        P/E ratio is but one valuation metric, and I don’t know why Ugly can’t tell me the one he was using himself. And is he using trailing P/E or forward P/E?

        You know what the most common metric used by the world is? Market cap.

        Other common valuation metrics:
        – enterprise value
        – PEG ratio
        – share price/sales
        – EV/Revenue
        – EV/EBITDA

        All these metrics are used by institutions and individual investors to compare companies t try and determine comparative valuations. None are definitive answers and I never see any Pros claiming them to be definitive.

      • Chaka10

        Yeah, I understood him simply to be making the point that Apple is undervalued relative to IBM, MSFT, GOOG and AMZN …, seems that’s probably something we all agree with (by any of those metrics), no?

      • KirkBurgess


      • the Ugly Truth

        Read and COMPREHEND.

        If you are a numbers guy; it is all there for you to look at.

      • the Ugly Truth

        I’m going to assume u ain’t being pretentious…despite your condescending comment.

        However, if you are confused about how market caps are derived, perhaps you should hold your tongue or err fingers in this case.

      • KirkBurgess

        How market cap is derived, as per an encyclopaedia:

        “Market capitalization (or market cap) is the total value of the issued shares of a publicly traded company; it is equal to the share price times the number of shares outstanding.”

        Well it seems to me using this formula apples market cap is larger than all the other companies you mentioned. I don’t see P/E ratio mentioned in the encyclopaedia entry for market cap anywhere I’m afraid to tell you.

      • KirkBurgess

        Share price x number of shares outstanding.

    • Joseph Carducci

      Fund managers may be well informed, but we must consider what their expertise is. I would suggest that fund managers are students of social interaction and game theory, on an in intuitive level at least. There job is to react to a daily stream of information. Most of this information cannot be relevant since business dynamics simply don’t change on a daily basis. So in order to make money on a daily or weekly basis you need to learn what will make everyone else trade and anticipate trends. It becomes game theory and psychology not business or economic analysis.

      I think it’s crucial to remember that this is an inevitable consequence of the timescale not the morality of the individuals involved. If you have to trade every day every hour every week but the real friends only change once every few months or years you have to trade on misinformation which means you have to understand how rumors created and destroyed.

      • Joseph Carducci


      • N8nnc

        A trend can be a real friend, depending on how it ends!

  • Chaka10

    It’s perhaps obvious, but may be worth pointing out, Apple continues to do well in the United States, and unlike in the BB case, the decline in Apple share price (and even greater decline in the EV, given adjustment for growing cash) is less driven by concerns in the US than in EMs — where evolution of smartphone adoption from high to low-end is most acute.

  • AlleyGator

    One critique of your analysis: choosing to model the market cap ex-cash is somewhat arbitrary… Wall Street will often discount cash based on the particular circumstances of the company.

    “We do try to reflect [cash] in the P/E ratio if we think it’s going to get monetized — if they’re going to use it for something. if we think it’s going to sit there, you don’t get a heck of a lot of credit.”

    Apple is certainly a kind of company that is content to let the cash sit there. Warren Buffett also held extraordinary amounts of cash in Berkshire Hathaway, and complained of long lags before the stock price would accurately reflect the stock value.

    Neglecting cash though, I would say that in both cases, what the companies have lost is the expectation of a sudden rise in fortunes; a surprise upside. Apple is going to grow slow and steady but not extraordinarily. Blackberry is going to fade without the possibility of a rebound. There is a perceived limit on their growth potential.

    • N8nnc

      “Apple is going to grow slow and steady but not extraordinarily.”

      Let’s see how they do in the Fall quarter and beyond. A year+ of sustaining can look slow, but lead to great, years+ disruption.

  • Obvious difference is Apple is expanding from a small base of customers buying more expensive products (e.g., $2000 Macs) to a broader base buying less expensive products (e.g., $400-500 iPhones and iPads). Each Apple customer is, on average, spending less than they were four years ago, but there are a lot more of them now. BlackBerry customers seem only to be declining in both areas.

    • KirkBurgess

      For the last 10 years, the average apple customer has been someone purchasing an iPod, not a mac, and since the release of the iPhone the ASP and net profit per customer has risen dramatically.

    • mieswall

      Not sure. Apple users expansion came with iPods. Much is said (correctly, I think) about the synergy of Apple products, meaning many users start buying an iPhone (that alone, more money than the iPod of years ago), then a mac, an iPad, and several peripherals. With each new product line (as the iWatch and iTV to come, sooner or later), this trend should be reinforced. Not to speak about the freight train that’s iTunes and its content.
      If any, customers of today should value more, not less than those of 2010 -if Apple is able to keep them loyal, that’s the whole point, imo-. The company of 2013 has higher margins (even after contraction after ip5) per products and more products, all of them complementary. Since most of current 575M itunes accounts are of new users, that have not changed their original iphones, and most haven’t yet bought his second Apple device (and so, hardly perceiving the benefits of that synergy), Apple may probably see an explosion in sales in the coming years. It just depends on Apple, to keep producing attractive, sticky devices and OS features. The resilience of Macs, still growing while the rest of PC market is shrinking, may be explained because of this.

      • It’s a similar situation, but in terms of both absolute growth and growth relative to Mac growth, the iPod was nowhere near close to the expansion we’re seeing with iPhone + iPad. Mac sales were certainly not keeping up with iPod sales volume but revenue was nearly even. iPhone + iPad growth has exploded past both.

  • jeff g

    Apple is a hybrid. They are the tortoise and the hare. This makes them confusing and hard to analyze. Wouldn’t a bizarre creature like this be doomed to fail? I can’t understand it or place a value on it, or estimate its performance, because I have nothing to compare it to. Besides, logic and conditioning tell me that strange things are scary and dangerous. Safer to condemn that which we don’t understand…

  • macg

    There seem to be 2 premises to this article.

    1. that US consumer demand is a predictor of worldwide use. That seems sensible.

    I live in France and remember my niece saying she would always buy Nokia, well after the first iPhone came out. It was misplaced brand loyalty – she had always had Nokias ever since she was a small child and so had her mum, so was very attached to them – and iPhone mania just hadn’t reached these shores yet. Even a year later I saw on Facebook a shot of hands making a phone circle – not one iPhone, all Nokias and Blackberries. Now they all have iPhones, or if they can’t afford them, Samsungs.

    This year I went to Gambia where most people that interact with tourists have phones (but few have electricity). I asked what phones they had – one said Sony, my guide said Nokia, he thought Nokia was the bees knees. He’s definitely a future Samsung or Lenovo owner, I would say.

    2. that falling Blackberry EV/user was correlated with US sales. But a dropping Apple EV/user is not (yet) correlated with Apple US sales which are in fact rising (so in fact inversely correlated). But maybe there’s a warning flag there somewhere. Interesting but not sure where to go with this one as lack of correlation is hard to draw conclusions from.

    Re the recent podcast, I think it’s worth bearing in mind that there are enormous untapped markets out there, often overlooked by US and even UK analysts. For example, if I want to watch Game of Thrones or any other similar series reasonably close to time of original broadcast, I have 2 choices. Either get a Sky satellite dish and get an illegal UK subscription card by some underhand method. Or watch it on a pirate site on the internet. We don’t have Netflix, or Hulu, or Amazon TV and iTunes has very few programmes and in any case overpriced. We’ve only just got Spotify. And I live in a place with one of the highest per capita GDPs on the planet. My cable provider is really useless – their pay per view mirrors iTunes France which also has a very poor selection. If that’s the case here, then I guess most of Europe ($17T – still largest economy on the planet let’s not forget) must be like that. And a 10-20 year lag for most of Asia and South America and a 10 – 40 year lag for most of Africa. If there was a legal way of subscribing to all the content I actually want to watch I’d do it in a heartbeat. My money is just waiting. I regularly watch films on iTunes simply because it’s the only way I would ever get to see them. I would watch 10x more if they had 10x more – but rental only, or better still, subscription.

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  • BrokenEnglish

    I think the first graph is well correlated with my personal experience. I’m a teacher in Spain and I have seen that:
    – In 2012 a lot of my pupils (14-16 years old) bought a lot of Blackberries because they were offered very cheap. I’m sure that Blackberry didn’t sell so well in the USA.
    – For my pupils Blackberry was an upgrade from the feature phone or their first phone. My pupils spends very little money in apps and devices. Some of them didn’t see the need to have more than eight or then apps. They use whatsapp and twitter a lot.
    – Now they are all very insatisfied with Blackberry and they are trying to convince his fathers to obtain a good android phone. They would like an iPhone, but it’s seen like very, very expensive. All they know is that they don’t want a Blackberry anymore.
    – My personal conclusion is that Blackberry will not survive except if it’s able to disrrupt another market, something like Apple did with the iPod.

  • James Hummel

    @macg. I’m in Japan and the App Store often let’s me discover something new. My friend from Vietnam wanted to watch the latest season of “Game of Thrones”. Discovered an app called “TimHd” and we are watching episode 8,9& 10 on my ipad. Getting back to Blackberry,it’s fine hardware but its lacking in usability.

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  • Chaka10

    “In the case of RIM/BlackBerry, the drop in value per user accurately foretold the drop in user base. Does the drop in value per user for Apple foretell a reduction in users?”

    I’d like to share with this board a comment I just posted on Tiernan Ray’s Tech Trade Daily blog (Apple: Cheaper iPhones Tricky, Says UBS; iOS 7 May Restore Innovation).

    • Jeff g

      I think your points 1, 2 & 3 above all stand to benefit from the BYOD (Bring Your Own Device to work) trend that appears to have years left to run.

      • Chaka10

        @Jeff g Yes, I meant 4 above to refer to misc other factors, including the one you mention. I think mobile enterprise technology is in early days (years to run as you say — my goodness, let’s realize that 4G is still rolling out in much of the USA, nevermind ROW). I believe the iOS advantages in mobile enterprise (standardization, ease of management, security) is hugely under appreciated, though clearly appreciable in various data. I believe the iPad will continue to gain in the enterprise, and the seamless iOS integration of user metadata across devices (including the Mac) will feed back positively to iPhone sales. So, yes indeed.

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