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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.

BB10
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?"

RIMdenberg
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 Tony Swash on 6/29/2013 12:46:47 PM , Rating: 0
quote:
The big difference is that MS has plenty of money to play for the long run, and Windows Phone is a really good OS. Apps are being launched left and right currently. I think MS is right at the tipping point now. More people are showing interest, they have their advertising together and apps are there. My daughter chose WP8 over iPhone today.


A very interesting way to visualise the actual usage of the various mobile OS is available by visiting this site

http://www.mapbox.com/labs/twitter-gnip/brands/#

What this site does is show a graphical map of the world's tweets showing which mobile OS they came from. You can toggle each OS off and on (iOS, Android and Blackberry are shown as separate data layers but Windows Phone is lumped in with 'other') and zoom into specific countries or even cities. Although this site only shows the tweeting use of mobile devices it is probably a reasonably accurate indication of the general usage patterns of the various mobile OS.

Playing around with this data tool is interesting. I was struck, for example, by how few Blackberry users there were in Europe, mostly they are in the UK, Spain, the Netherlands, and Paris, but whole areas of Europe (Germany and Italy and all of eastern Europe for example) and large areas of the rest of the world seems to be almost Blackberry free. Blackberry seems strong in south east Asia but completely absent in China.

Windows Phone is largely non-existent outside of the UK and the USA. Both Android and iOS have a strong global footprint and both seem to be doing OK in China but both have a very small presence in India with Android having the edge over iOS.

Personally I can see little evidence based on this real world usage data of either a revival in Blackberry fortunes or of any sort of Windows breakthrough. Blackberry looks like it has a patchy and light usage pattern globally, and Windows phone (shown here as part of the 'other' category) seems highly marginal.


RE: Surprise?
By BladeVenom on 6/29/2013 5:36:24 PM , Rating: 2
Latest from ComScore, May 2013 U.S. market share: Blackberry 4.8% - Windows Phone Microsoft 3%. http://www.comscore.com/Insights/Press_Releases/20...


RE: Surprise?
By melgross on 7/1/2013 10:11:03 AM , Rating: 2
May data is already too old. Blackberry is like Palm was—too small to wait it out. People simply are losing interest. Their high in subs was 80 million. Now it's down to 72 million. Does anyone have any doubt it will continue to drop?


RE: Surprise?
By Rukkian on 7/1/2013 1:36:28 PM , Rating: 2
I dont really care about that link, as tweets really are not a good indicator of anything. I don't tweet at all (see no reason for it) and I am sure there are many that feel the same. With BB, most people (at least in the US) have them because their IT department made them use it, and are locked down much more often. Many times this would include tweets, and any non-work function.

I am by no means a BB fan, but the numbers would definately be skewed if you are using stats that come from a completely non-business related activity.


"So, I think the same thing of the music industry. They can't say that they're losing money, you know what I'm saying. They just probably don't have the same surplus that they had." -- Wu-Tang Clan founder RZA














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