BlackBerry turns profit but loses users - TechCentral

BlackBerry turns profit but loses users

Thorsten Heins

Thorsten Heins

BlackBerry managed to ship a million of its new BlackBerry 10-powered Z10 handsets last quarter, despite only having a month of the quarter to do so. However, the company also lost three million customers during the period, a trend it will want to arrest as it tries to keep its remaining 76m users loyal to the brand.

The numbers are contained in the Canadian company’s latest quarterly results. BlackBerry generated revenue of US$2,7bn for the quarter — down 2% from the previous quarter but by a huge 36% from the same quarter in 2012 — and generated cash flow from operations of $219m.

Perhaps the most important figure is the six million devices during the quarter, a million of which were Z10 handsets. Given that the Z10 was available only in the UK and Canada during the period, and has yet to be launched in the US and emerging markets where the BlackBerry brand remains strong, that figure is impressive.

The company shipped fewer than 400 000 of its PlayBook tablet computers during the period, a device that is sure to get an overhaul soon.

Analyst Jack Gold of J Gold Associates says given people’s expectations, BlackBerry performed “quite well”.

“They had a profit and more importantly increased their cash position. That means they have the capacity to invest in marketing the new [BlackBerry 10] devices,” Gold says.

The loss of subscribers is troubling, though particularly in the US, but Gold says the Z10 wasn’t available in that market to “stem the losses”. The next couple of quarters will “really tell the story of how well the devices are being received in the US”.

“The big challenge for BlackBerry is to up the marketing and get people interested in the devices,” Gold says. The company has indicated it intends increasing its marketing spending by 50% in the coming quarter.

BlackBerry claims that 55% of sales of the Z10 have been to non-BlackBerry users, a figure Gold calls “encouraging”, but notes that the company didn’t specify how many of those were upgrading from feature phones as opposed to defecting from other smartphone brands.

Furthermore, Gold says the release of the Q10, a more traditional form factor for the company, “will appeal much more to the traditionalist BlackBerry users” and should drive sales.

“BlackBerry is certainly not dead yet and I think it’s a mistake to count them out yet, even though they still have some significant hurdles to overcome.”

Jan Dawson, chief telecoms analyst at Ovum, agrees that the loss of subscribers and the number of devices sold are the most important figures from the results.

Dawson says the BlackBerry 10 platform is off to a good start and agrees that the next quarter “will provide a much better basis for judging BlackBerry long term as we’ll have a full quarter of availability, the launch of the Q10, the US launch, and an increase in marketing from BlackBerry and its carrier partners, which should provide a better basis for judging performance going forward”.

The loss of subscribers is a worrying sign, according to Dawson, because BlackBerry’s “single biggest asset has been its large existing subscriber base, who are the most likely buyers of BlackBerry 10 devices, and the acceleration in the decline of that base reduces the size of the addressable market for BlackBerry 10”.

He suggests that it is also indicative that the growth BlackBerry has enjoyed in emerging markets is no longer sufficient to offset the “rapid decline in mature markets, and it’s unlikely that the company can reverse this trend long term”.

Dawson points out that as shipments have fallen, service revenues have become much more important, growing from 15% to 36% of BlackBerry’s overall revenues over the past few years. “The loss in subscribers means declining service revenues, which will put further pressure on margins, which have dropped in recent years too.”

On the whole, Dawson sees hope in the numbers, but also reasons for “serious concern”. The company has to get mobile carriers behind its new products and do its best to build momentum around its new operating system.

BlackBerry CEO Thorsten Heins says the company has “implemented numerous changes” over the past year that have resulted in its returning to profitability in the fourth quarter.

He says that it will increase its marketing investment this quarter and believes it will approach “breakeven financial results in the first quarter based on its lower cost base, more efficient supply chain, and improved hardware margins”.  — (c) 2013 NewsCentral Media

Comments are closed.

© 2009 – 2020 NewsCentral Media