BlackBerry Posts Surprise Loss on BB10 Flop; Only 2.7m BB10 Devices Sold in Q2
June 28, 2013 2:47 PM
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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. (
) -- 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
(BB10). And prior to that, last year it had shuffled management, tapping
to be its new chief executive.
But for all that effort, the
[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.
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. (
, 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
of around $39M USD ($0.06 USD/share). The analysts expected $3.4B USD in revenue, RIM delivered only $3.1B USD.
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, t
he 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]
. 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. (
), Apple, Inc. (
), and Microsoft Corp. (
) -- 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 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 --
)?), 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.
This article is over a month old, voting and posting comments is disabled
6/29/2013 10:49:08 PM
"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." BB is sitting on 3.1 billion in cash.
6/30/2013 2:20:51 PM
Great point. BB10 commercials are almost non-existent and when I do see one it is the same boring ones they have always had. BB reminds me of AMD in this regard; They expect their company to become a brand name again with almost zero advertising (ok, AMD did have those K6-2 commercials back in the day). Most "average" users don't even know that BB10 exists.
Game over. Goodnight BlackBerry. Thanks for playing.
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