Traditionally, BlackBerry (NASDAQ: BBRY ) and Apple (NASDAQ: AAPL ) have both sold smartphones, tablets, cloud services, security software, and other like products, all in the realm of technology. Yet apparently, health care is just too big an opportunity to ignore, and both companies are making major strides to enter the space in multiple ways.
A market of opportunity
According to the Consumer Electronics Association, revenues for consumer electronics are expected to grow 2.4% this year to top $208 billion. While that represents an enormous market, it doesn't come close to the $2.5 trillion U.S. health care system, a market that's expected to grow at an annualized rate of 5.8% over the next six years according to economists in the Office of the Actuary at the Centers for Medicare and Medicaid Services.
Nonetheless, much of the health care market is outside Apple and BlackBerry's grasp, unless the two companies decide on opening hospitals, hiring doctors, and selling insurance. Much of the health care industry is broken down into key service segments, like a $770 billion government-funded health insurance program, that neither Apple nor BlackBerry could penetrate.
However, both Apple and BlackBerry do have an opportunity in products and services, encompassing industries such as health care analytics, which is expected to grow at an annualized rate of 25.2% with revenue of $21.3 billion by 2020. Based on Apple and BlackBerry initiatives, it appears that both companies want to take a bite out of this market and others alike.
A platform within a platform
Apple's new Health service is being seen as a way for consumers and health care professionals to share data. Much as Apple attracted application developers through iOS, it'll aim to do the same with HealthKit in the health care sector.
As of now, Health is being used as a hub to store data such as blood pressure, weight, and calorie intake, which can then be shared with medical devices and developed applications to create better health management. It's also being used by prestigious health care centers at Stanford and Duke University in clinical trials. At Stanford the Health app will allow physicians to easily track and share blood sugar levels in diabetic children. Then at Duke, patients with cancer or heart disease will have key data points such as weight and blood pressure stored on the app.
While exact monetization practices remain unknown at this time, Apple could create revenue much as it does from other software such as iTunes, iBookstore, and its App Store, by collecting a percentage of the monies developers earn from application sales, along with sales from apps that it develops. Furthermore, by collecting data, Apple opens the door to sell that data to hospitals, physicians, and even the government to further improve the health care industry. Importantly, Apple created $4.5 billion from software during its last quarter, a number that the Health app could increase long-term.
Creating individual services from data
Apple has clearly set the bar for health care software high, but so has BlackBerry with an initiative called Project Ion, also known as the Internet of all things, which is somewhat similar to Apple's approach. One notable difference is that BlackBerry itself is creating software based on past data, not current or future data, to provide a service in the health care space.
BlackBerry's first service will target hospitals and will detect early signs of illness, which could be as simple as bacterial infections or as complex as cancer. Theoretically, a patient could be getting an annual checkup and then, based on collected data, BlackBerry's software can alert the physician of a potential illness that should be explored.
This software was derived from 16,000 medical devices that are connected to BlackBerry's operating system. From these devices, more than 3 billion vital signs have been collected annually, thus providing BlackBerry with a large sum of information that it is now sharing in the form of products.
Like Apple, BlackBerry hasn't unveiled a monetization approach, but like other software-as-a-service, investors can assume that subscriptions will play a role. If successful, BlackBerry can then create additional services that perform certain functions within the health care industry. Or, BlackBerry will branch out into other key segments such as food, manufacturing, and travel to develop products based on data.
Foolish thoughts
Apple seems to have a good plan in place. The Health app is an entrance into health care, but more importantly is that it serves as a platform within a platform, iOS. However, with nearly $180 billion in 12-month revenue, it could take the company several years for the software to ever become meaningful to its overall business. In other words, even a billion dollars in annual revenue won't move the needle for Apple.
However, BlackBerry's Project Ion is just as impressive with the opportunity to enter new market categories, and importantly, it has the opportunity to be a big part of the company's overall business, which created $4.7 billion in revenue during the past 12 months. Therefore, Apple's Health app might have more commercial success because of the large user base and presence of iOS, but BlackBerry has a great presence with enterprise customers.
According to BlackBerry's CEO, 80% of the company's 50 million subscribers are in business, which is where it'll aim to make a dent with Project Ion. Therefore, Project Ion is a big deal for BlackBerry, and given the size of health care, it could also be a big deal for the stock.
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