BlackBerry Q4: Lives to die another day?

BlackBerry Q4: Lives to die another day?

Summary: The BlackBerry maker powered through the fourth quarter with a better than expected bottom line, only a couple of months after announcing its reviving mobile platform. Faced with uncertainty still, there should be some cautious optimism for what happens next.

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"No, Mr. Bond. I expect you to die!" Let's face it, we all did. Starting with the good news:

BlackBerry is still alive. Its hair has fallen out and last rites have been read out a few times already, but its life support is still beeping and its heart is still beating. The even better news is that the firm didn't completely throw itself under the financial train this morning when it announced better than expected bottom line results for its fourth quarter and 2012 fiscal year.

Frankly, it's all pretty much good news. But put down the party poppers and champagne. Don't get too excited just yet.

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BlackBerry chief executive Thorsten Heins showing off the two devices that could ultimately save the company. (Credit: Sarah Tew/CNET)

From today's earnings, BlackBerry reported a fourth quarter net profit of $98 million, or 22 cents a share. For the fiscal year, the picture was still pretty bleak on the top line, reporting revenue of $11.1 billion, down 40 percent year-over-year.

Current estimates show that while BlackBerry is expected to lose money every quarter in fiscal 2014, it can survive based on its cash flow, says ZDNet's Larry Dignan. Adding $800 million to its cash pile during the fourth quarter just bolstered its longevity significantly.

Thanks to a large-scale launch and some significant partners, ready-and-waiting enterprise clients, and willing buyers — one with an order of 1 million devices, showing a great show of faith in the firm — the company has returned to profitability.

But in context, it has only just released one of the two phones it has virtually rested all of its hopes of survival on in the U.S., after what was a generally positive reception at its BlackBerry 10 launch in January — if you forget the plummeting of its share price by 13 percent during the two hour long event.

If you were expecting a fanfare this time around, just wait a few more months. The upcoming quarter will be the kicker. Only then should you begin to judge whether or not BlackBerry is on the comeback train, or just seeing a short-term hit from better than expected December holiday sales. 

The company's fourth quarter ended March 2 and its new BlackBerry 10 phones were launched in the U.S. on March 22. While the BlackBerry 10 platform and the two new phones — the touch-only Z10 and the keyboard-enabled Q10 — were announced in late January, nothing was launched in the largest smartphone penetration market BlackBerry was pitching its devices in: the United States.

In spite of modest sales of the older BlackBerry 7 devices during the December holiday season, BlackBerry pitched its already delayed BlackBerry 10 launch at the worst possible time for its financial reporting. Many potential BlackBerry 7 customers were waiting for the launch and release of BlackBerry 10 in what U.S. customers expected would be in late January.

The BlackBerry Z10 had launched, after the January event and before the end of the fourth quarter, in four major markets: the U.K., Canada, the United Arab Emirates and India. Available on nearly every major carrier in the four regions, it was all but destined for a positive lead off the starting block.

In total, the Z10 went on sale during the fourth quarter in about 25 countries on 650 carriers. Out of that, just 1 million BlackBerry Z10 devices were shipped. That alone is not an impressive figure. 

The U.K., with a BlackBerry population of about 8 million users at its peak, is understood to have had worse than expected sales, in spite of some major retailers reporting sellouts in their stores.

According to Canaccord Genuity analyst Michael Walkley, in the week following the late January launch in the country, he cited a "limited initial supply" of the BlackBerry Z10, with in some cases as few as 15 devices per store on offer to the general public, which led to a perception sales were doing better than expected.

India was the wildcard, though. According to CNET, the Z10 sold out early in countries like India and Canada — in some cases in as little as two days. However both Canaccord Genuity and Pacific Crest analysts cut their estimates for the number of smartphones sold through retailers in India after speaking to sources in both stores and the supply chain. 

 India has a smartphone penetration rate of 10 percent, compared to the U.S. rate of 50 percent, according to comScore figures. For India, that's still around 120 million people in BlackBerry's catchment audience. However, if the U.K. "limited initial supply" situation is anything to go by, BlackBerry may have seen a higher uptake in buyers, and therefore a better fourth quarter.

Jefferies analyst Peter Misek believes BlackBerry's enterprise pitch, specifically in its mobile device management software, "will gain traction throughout this year, and as such "see a significant ramp in revenues next year." In-built consumer features, such as WhatsApp integration, "is a key feature for BlackBerry to have in order to gain traction in Europe and emerging markets," he said in a note to investors.

Meanwhile, Macquarie analysts were too busy focusing on the Samsung Galaxy S4 saying two things to its BlackBerry investors: first that some enterprises may hold off on the Z10 until they can evaluate the Galaxy S4; and secondly, "the GS4 clearly beats the Z10 on all technical aspects as demonstrated in the following figure." (And that was in a note titled "BlackBerry" not "Samsung," by the way.)

In the battle for the third-place slot, all eyes are on BlackBerry to see if it can carve out a space ahead of Windows Phone. Morgan Stanley analysts believes BlackBerry will fall flat on any attempt with its BlackBerry 10 platform. Instead, they believe BlackBerry 10 will primarily sell into existing BlackBerry 7 users rather than Android or iPhone converts, and as a result will only take a 3.5 percent global share by fiscal 2015.

While the firm's death spiral spin has ground to a halt — a phrase coined by BlackBerry chief executive Thorsten Heins last July following a $643 million operating loss — things are not as bad as were forecast.

Something else to look forward to came in an interview with CNET's Roger Cheng. Heins said the company has two more BlackBerry 10 ready phones up its sleeve, including one "flagship" device in time for the December holiday season. The long-awaited keyboard-enabled BlackBerry Q10 will arrive in at most three months time. 

The next quarter, due to be reported on June 28, will show far more clearly — and fairly — how the smartphone maker is faring post the launch of its BlackBerry 10 devices in the U.S. market.

Start on a good note, end on a good note. This might just catch on. 

Update: an earlier version of this post erroneously said that 1 million BlackBerry Z10's were sold. They were shipped, not sold.

Topics: BlackBerry, Smartphones

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59 comments
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  • how

    Could this phone NOT bring BB out swinging? Just gotta show it to people. I still hear people say BB is a horrible phone compared to todays other flagships but they are basing that on older BBOS phones that were forced on them years ago
    gordongr
    • Too Late for Show and Tell

      The company I work for (40,000+ North American users) shut down the last of its BES servers more than a year ago, with a majority of employees now on Android. Once vested in an application ecosystem, it is very difficult to get users willing to change. We've had no Blackberry activations with this new phone, and as far as I know, our mobile phone department isn't even bothering with instructions on setting corporate mail and other services on the thing.
      jvitous
      • Never too late

        ...and is this meant to mean that all companies are following your trend? No
        CarusDave
        • Of course they still had their marginal base

          But in today's ecosystem-based world, there is great expense to be realized in migrating from one ecosystem to another. RIM (and Microsoft's) biggest problem is they were out-of-action when the largest majority of users were choosing the ecosystem that they are now financially vested in. If it was just about the phones themselves, the "build a better phone and they will come" paradigm of old might still work -- in pre-smartphone days, for example, Motorola would greatly expand and contract on the bases of momentary success with the popular phone of the day. But today, smartphones are less of a fashion accessory -- form and function are all remarkably similar. So it comes down to how quickly can my new phone, apps and all, to a replacement phone. Staying in the same ecosystem makes this almost trivially easy while switching to another presents more than just a learning curve.
          jvitous
          • I have a lot of Android apps, ...

            ...and I am "financially vested" to the tune of less than $100.

            No big deal. I understand those in the iOS infrastructure may have a higher commitment.
            radleym
          • 55% of new purchases coming from Android/iPhone users

            You may have missed that.

            The only thing I am sure of is we all have no clue what the smartphone market will look like in a year or ten. No one predicted BB would MAKE smartphones into a market, no one predicted iPhone would change the world with their reinvention of a smartphone, no one predicted Android would catch iPhone. That all happened in less than a decade.

            BYOD is a constantly changing landscape and this is an unqualified hit. Also, for BYOD, I'm not sure what is better than BES 10. I guess it depends on how much you value security.

            Anyway, it's not just the Z10, which is a great phone, it's BB10. It's simply better and word of mouth is going to build momentum and sales leading up to...the Q10. This one million sales (in one month UK, and 3 weeks Canada mind you) and the uproar its creating is for a Blackberry WITHOUT A KEYBOARD.
            Daniel Kinem
          • Short sighted

            As Mr. Heins accurately pointed out recently....the tech sector is constantly influx due to innovations and those who do not consistently innovate are certain to be left behinds (sans BB own bio).

            The consumer and enterprise markets are always looking for the newest, most efficient, cost effective way to do business....if BB offers that with their new OS then they will have plenty of customers lining up. Anyone claiming BB or a potential new rival that enters the market place is doomed to failure, probably thought the same way five years ago when Apple rose up to take over BB as the industry leader.
            IsMarkWright
      • Interesting point, but it dosnt matter much.

        40,000+ North American users? Interesting, but in one order alone there was 1,000,000 BB's ordered. So 40,000 is a "thats unfortunate" number, but it comes nowhere near to running the gravy train off the tracks. Realistically, ten times that number dosnt do it.

        Will Blackberry survive? Who knows. Its still a little early to say.

        I would hazard a guess that for the relatively long term they will, and by that I mean at least the next 2-3 years. Its the very long term that the real question remains unanswered about their survivability. Over the next 5 years they will have had to at least genuinely make it back into the market with a renewed strong base or they will likely be finished. A good company can often afford a 2-3 year struggle if they have a good product or two to help them along, but if those products don’t get enough market share the only way the company can continue after a couple of years is if they have enormously deep pockets, think Apple, Microsoft, Google deep pockets for that.

        At any rate, this story as it sits currently should be at least a smarting boot in the hind end for some of the loudmouth writers and posters who love to spend their free time prognosticating about the demise of one huge company or another. Its not just stupid; its surely that, but its actually completely uninformative and incredibly misleading to those who don’t know much about big business at all to go around shouting about the soon to happen demise of any large company.

        Intel is finished! Google is going down! Apple is going to collapse now! Microsoft is dead!

        And of course the only one that had even the slightest shred of evidence to indicate a possible collapse; Blackberry is doomed!

        Well. As is now finally seen here at ZDNet, its not so easy to kill a big company that actually has some brains and some money and some history.

        Most of these big IT companies wouldn’t just have to do one or two really dumb things to come close to collapsing, they would have to probably do at least a couple of really dumb things, then probably a couple of monumentally stupid things, and these cant just be imaginary dumb or stupid things that “some people” don’t like, they have to be things that don’t result in millions of units of sales, they usually cant be things that while loudmouths say they are dumb, many others are saying they are great.

        A big IT company with massive pockets can survive a tremendous amount of less then stellar business decisions so long as they keep bringing in some income for as long as it takes to right the ship.

        In the case of RIM, now just Blackberry, they did do something that turned out to be monumentally stupid. And Microsoft did it too, but Blackberry was the smartphone industry leader and really should have known better and recognized the problem instantly. That monumentally stupid thing was not recognizing the power that touch screen computing brought to the smartphone market at least the day after the very first iPhone came out. Many would say a company like BB should have figured it out when they seen the iPod touch themselves, but they really should have been on it hard once the iPhone deployed.

        Now its all about catch up. From way behind.

        Stop predicting and just watch for a while. Nobody is going anyplace tomorrow. And not for a while yet.
        Cayble
        • you're mostly right

          but that monumental error also was shared by S. Ballmer, we all remember how he laugh when the 1st iphone launched. And we all remember, the iphone not only damaged BB, it also destroyed WM.
          theo_durcan
          • As I said, Microsoft too.

            But Im sure you will agree, Microsoft never quite had their hand on the "pulse" of the smartphone market the way BB did.

            BB was smartphones.

            When something like an iPhone appears in your very own market, you have simply and absolutly got to have the savvy and brainpower to truely understand the impact. You cant say, "we were too busy for about 3 years to notice it was killing us".

            It sure would have helped MS if they had of been able to see where the touch screen interface was going to take smartphones a little faster, but its one thing to be hurt by poor insight, its quite another to almost be killed then kicked around the room for a year because of it.

            If Blackberry pulls out of this or not, its still going to go down in business history as a lesson to be well learned when a powerhouse like Blackberry spends too long scratching their heads. And likely other parts of their anatomy.
            Cayble
  • 1 million z10s sold in an abbreviated quarter

    Is huge. They beat the odds, and deserve props.
    sagec
    • 100% agree.

      This is a major accomplishment.

      The reality is you don't have to have 50% market share to survive. Even 1% market share in the handset business is lucrative if you live in the upper end of the market. If they can get to 5% of the handset market, BB will have a reasonably bright future.
      Bruizer
    • Authors should be glad

      that BBRY is still alive. They can keep their job for a while more, writing negative pieces about their favorite whipping boy.
      Dyson Lu
  • Good job

    A nice job for BB. I don't use BB at all, but seeing them start to make a comeback is nice. The more competition in the phone industry, the greater the drive for innovation.
    jackmcnally12
  • Funny

    I had to wipe the coffee off my monitors after this gem

    "some enterprises may hold off on the Z10 until they can evaluate the Galaxy S4"

    Please!! We have not now or every evaluated Samsung. They are not an enterprise vendor period. Our enterprise standard is Blackberry.

    Your want to use X other device - great we have a BYOD program and you can buy it yourself. That is the model EVERY company is following. Please show me any company that has Samsung as their standard (outside of Samsung). It's just NOT GOING TO HAPPEN.

    Blackberry is back people. Heins should blare some Aeromsith "I'm baaaacckkk in saddle again".
    MobileAdmin
    • Android phones can be managed every bit as much as Blackberry

      Perhaps you haven't bothered to look at the technology? All Android phones must have a Google Device Policy app installed and activated before it will work with corporate systems. This allows us to nuke lost phones from orbit, as well as wipe the phone for individuals who cease to become employees.
      jvitous
      • Android API?

        I'm sorry there are very few API calls for MDM platforms to manage Android. Remote wipe is not management. It's a security control. If thats all you need - great. Use ActiveSync and call it a day.

        The majority of companies using Android or iOS are doing so by sandboxing corporate data. Somewhat lessens the appeal of the device if your limiting how it can be used. Reality is these devices are mostly used for personal usage and not work related activity.
        MobileAdmin
        • 80/20 Personal vs. Corporate Owned

          Most of our users are using their personal phone for corporate use. It is a much greater expense to the company, and a major inconvenience to many users -- if all phone were corporate-owned. Since it is not, sandboxing the corporate use of the phones is the most viable option.
          jvitous
      • Sorry jvitous, on this point MobileAdmin is right.

        When Blackberry is on their game, which they appear to be again for at least now, they still cannot be touched by an Android phone for reputation.

        You can love Android all you want, thats your choice, but you might just as well try and convince a Mac user that there are some great reasons to switch to Windows as to try and get a company thats always preferred to use Blackberry to switch to Android, and thats Android any brand.

        Thats not to say that Blackbery will not have to do some hard work to get back closer to where they were, but there are millions more smartphones around in total than beefore Blackberry started to tank, so nobody is going to be the dominant smartphone player like Blackberry once was. If the smartphone market used to be an elephant, its now a Blue whale.

        But when it comes to enterprise marketplace and security and business use and acceptance, with a little work on BB's part, all the upstarts will really have to watch out for Blackberry because its very likely in those areas specifically, that when they are trying to show off how they can "do corporat" make no error, Blackberry will very likely be able to walk in aand put on a sales show that will punish the upstarts. They have done it thousands of times in the past when they were the smartphone kings and corporate go to standard. hey know exactly whats needed, whats expected and exactly how to show it off.

        If they have lost their edge there, they have likely lost it all then anyway.
        Cayble
    • blackberry died years ago

      don't know anyone who actually uses a blackberry anymore. Samsung in just a few years has grown to dominate the phone industry. so I wouldn't be surprised if they do become the next Enterprise standard. only reason blackberry did better than expected is they finally came out with a Phone worthy to try out. people like to try something new and this is the first time in years that Blackberry came out with a whole new OS and a Powerful enough phone. so when the tryout phases is done with blackberry then we will see if consumers like blackberry again or not.
      nbdeath