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  (Source: Nickelodeon)
Analysts expected a modest profit, but underestimated BlackBerry's ability to disappoint

There was a time not so long ago -- 5 or 6 years, perhaps -- when the BlackBerry was viewed as a slick status symbol, a business road-warrior's go to device.  But its maker -- the Canadian company formerly known as RIM, now rebranded BlackBerry Ltd. (TSE:BB) -- can only look helplessly back on those days when its brand image held such cachet.

I. BB10 Looks Like a Flop, Early On

Today BlackBerries are the bunts of jokes ("When are you going to get a real phone?") and worse yet they're just not selling.  BlackBerry seemed to give things an honest effort, in January launching its much-delayed modern operating system makeover -- BlackBerry 10 (BB10).  And prior to that, last year it had shuffled management, tapping Thorsten Heins to be its new chief executive.

But for all that effort, the fiscal report [PDF] for Q2 2013 (fiscal Q1 2014) suggest the phonemaker has little to show for it.  Two quarters in and BB10 is starting to look like one big flop.

Analysts hoped for over 3.5 million BlackBerry 10 devices sold; instead only 2.7 million managed to be sold -- in line with previous estimates by market research firm Interactive Data Corp. (IDC).  Embarassingly, even the struggling Windows Phone platform passed BlackBerry by.

Overall BB sold 6.8 million smartphones, 

Worse, BlackBerry bled $84M USD ($0.13 USD/share) -- a surprise loss.  Analysts polled by Thomson Reuters were hoping for a profit of around $39M USD ($0.06 USD/share).  The analysts expected $3.4B USD in revenue, RIM delivered only $3.1B USD.

BB10 phones
The BB10 Q10 (left) and Z10 (right)

But probably the most grim sign for BlackBerry was that only two out of five of its device buyers bought BlackBerry 10 devices.  There were some mitigating factors -- namely, the keyboard equipped Q10 variant (a favorite among some die-hards) wasn't be available till May.

Thus expect BlackBerry to chalk poor BB10 sales up to slow carrier rollouts globally or other excuses.  But at the end of the day, the fact is that these devices were available on many markets (including here in the U.S.); the Q10 has been on sale for a month, and the Z10 was on sale the entire quarter.  

They simply weren't selling; or viewed differently customers didn't appear to feel the Q10 was worth waiting for.

After all the sacrifices, BB10 is coming up short in sales. [Image Source: Unknown]

Marketing was confused to nonexistent.  Part of that may be due to lack of resources.  After putting so much into its OS push, BlackBerry may simply not have had enough cashflow to buy ad time and hire top grade advertising talent.

In the company's own words it's facing hardship due to the "highly competitive" nature of the smartphone market.  It expects to post a loss in Q2 2013.

II. BB's Best Survival Bet is as a Secured Services Provider

The question is whether it can ever be a viable phonemaker again.  Trying to design you own user interface, app ecosystem, etc. is a massively expensive endeavor that only the biggest companies -- Google Inc. (GOOG), Apple, Inc. (AAPL), and Microsoft Corp. (MSFT) -- for the most part dare to do.

All things considered BlackBerry put up a valiant effort with BB10, considering its limited resources.  Even with all the delays, BB10 has some very nice features and relatively little in the way of glaring deficiencies.  "If it wasn't good enough," CEO Heins and company must be wondering -- "Will anything be?"

The RIMdenberg can't seem to catch a break. [Image Source: Jason Mick/DailyTech LLC]

The answer is likely no.

BB10 was almost destined to fall behind Windows Phone -- the sole surprise was that it did so so quickly.  CEO Heins contends, "[BlackBerry customers] an end-to-end solution, including the device."

True, but the worst case scenario is that there may not be that many BlackBerry customers soon.  If only ~1m customers bought BB10 handsets, the global user base may dwindle around 20-30m units (assuming a 2 to 2.5 year upgrade cycle).  Revenues would be at around $1-1.5B USD.  At that level it will be hard to attract developers, and nearly impossible to keep pace with Google, Apple, and Microsoft in OS development.

RIM's stock took a 26 percent hit as shorters and serious investors alike jumped off the ship amidst the grim earnings.

BlackBerry Secure Work Space
BlackBerry is already starting to transistion to platform agnostic services. [Image Source: BB]

Will BlackBerry die entirely?  That's unlikely.  It's losses aren't that bad (particularly, given its $3.1B USD cash pile).  If it isn't acquired (though who would be willing to take on this baggage is a tough question -- Hewlett-Packard Comp. (HPQ)?), it will likely be forced by that "highly competitive" market to become a third party provider of security products -- its service specialty.

It's already quietly started selling secured business service solutions for Google's Android and Apple's iOS.  It wants the focus to be on BB10 -- but that just isn't working out in its favor.  Sooner or later cold hard business realities will be force BlackBerry to become an enterprise service firm and bow out of the hardware market -- no matter how Thorsten Heins and his dwindling brigade of BlackBerry loyalists wish that weren't the case.

Sources: BlackBerry [PDF], Reuters

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RE: Surprise?
By GotThumbs on 6/29/2013 12:03:32 PM , Rating: 1
Not a single compelling reason for anyone with IOS, Android or WP8 to switch

The security. BB has always been superior regarding its security. Problem is most general users today assume thier information is secure....well we know that's not exactly the case now (NSA).

Of course BB is looking to market it's security features to other OS's so they will survive, but are making their hardware less of a requirement.

Myself, I use Android for the open ecosystem. Apple has it's place for those people who gladly would click on links and install software with out a socond thought of the possible security risk. Apple is was AOL was.....Phones for dummies IMO. I understand I will get flack for that, but I accept all critizisms. It's your choice to choose what device you use, but just take a moment to think if your choice includes living under a dome. Some people gladly choose that closed system so they can freely run and skip while others protect them....and thuse are to blame when the user experiences something bad. Apple has a great business model that keeps it's users limited to using its software and its marketplace. I will not deny thier props. That is why they have billions in the bank. Just remember the old adage. "A fool and his money are quickly parted".

How much do you pay monthly for your cell bill?

I've paid $29.97 a month for over two years using Page Plus (no contract) through Kitty Wireless. 1200 talk, 3000 text and 250 mb date.(increasing to 500mb this month with not price increase).

PagePlus uses Verizon's network. I went from paying 54.00 a month (including a discount through my work) for calling and texts just under $30.00 a month including data.

All you need is a Verizon phone with a clean ESN.

Best wishes on your freedom of choice,

RE: Surprise?
By TheEinstein on 6/29/2013 2:54:54 PM , Rating: 3
The days of a single phone type are over. You cannot succeed without variety to capture niche market segments.

I want a sliding out keyboard, that is my major niche. Next I do not want Apple, that is my anti-niche. I also want function for my phone over any other feature, this is my sub-niche.

This is why the iPhone has slowed to a crawl and why their stock dropped. A one product maker is a maker in bad shape against those able to capture many niche markets.

RE: Surprise?
By Dug on 7/1/2013 2:36:41 PM , Rating: 2
You should see how easy it is to deploy security across idevices from os x server in a corporate network. So much easier than blackberry and there's no yearly cost like there is for blackberry enterprise server. All settings from installing apps, vpn, encryption, remote wipe, etc. is all handled easily from one $500 mac mini.

RE: Surprise?
By retrospooty on 7/1/2013 3:59:39 PM , Rating: 2
No mobile phone is secure. If you are in a high security field like govt labs or even a tech company with secrets to keep , you damn well better not have them on your phone. Not any phone.

"We shipped it on Saturday. Then on Sunday, we rested." -- Steve Jobs on the iPad launch

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