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.
"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.
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.
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.
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.
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.