BlackBerry Revival Stopped in its Tracks

The future for BlackBerry looks dim indeed. This year was meant to signal the company’s revival, but it has been anything but. We have witnessed the company renamed, a new CEO, a new operating system, and new devices, but the company’s plans for a resurgence look to be in peril.

Over a quarter of the market value of BlackBerry, amounting to over $2 billion, was wiped from the company on Friday following the disclosure of the company’s fiscal Q1 results, which reported disappointing sales and significant losses. BlackBerry’s announcement doesn’t paint a pretty picture; the company was only able to shift 6.8 million devices, and suffered losses of over $84 million. This may have been a significant improvement on the $518 million loss the phonemaker made in the same quarter of last year, but well below the profits forecast.

The blow comes at a time when BlackBerry is trying to retake the smartphone manufacturer crown; once one of the titans of the industry, BlackBerry has fallen behind the likes of Samsung and Apple, and has spent the last couple years playing catch up with Android and iOS.

Devices running BB10, like the touchscreen Z10, have struggled to make an impact.
Devices running BB10, like the touchscreen Z10, have struggled to make an impact.

BlackBerry’s much-touted BB10 platform, through which the company has been trying to enact its revival, has been unable to make a significant impact in the market; the company was only able to shift 2.7 million smartphones running the operating system for the quarter (this figure details the number of devices distributed to retailers, and does not equate to direct sales to consumers). Considering the hopes pinned on the success of the new OS, these figures are disappointing to say the least.

It was not all doom and gloom for the company however. Revenues were up 15% on the previous quarter, despite a drop in monthly subscription numbers to BlackBerry services, which fell from 76 million to 72 million. Furthermore, financially the company is still on a firm footing; cash reserves actually went up this quarter by $200 million, to $3.1 billion.

Where does this leave BlackBerry then?

Investors are clearly unimpressed by the company’s latest attempts to revive itself, but the company remains focused on making its new devices – the Q10, Z10, and soon to be released Q5 – a success. Extra investment in BB10 is needed however; it is the company’s last chance to reassert itself, and has been off to a rocky start. But with no new major product launches on the horizon, media interest in BlackBerry is currently low. If the BB10 platform is to succeed then BlackBerry will have to pour money into marketing it, something it will struggle to do over the long-term without sales to drive forward investment.

Although BB10 received a warm reception from critics, it may have been too little too late. Mike Walkley, an analyst with broker Canaccord Genuity, said:

With Z10, Q10, and Q5 all shipping in the August quarter and BlackBerry still guiding to a loss we believe that is strong evidence BB10 has not turned around BlackBerry in an extremely competitive smartphone market.

Furthermore, there have been calls for the company to cut its hardware business, with Deutche Bank’s Brian Modoff arguing it has actually become its biggest weakness:

Unfortunately, we believe that continuing to run the devices business could be their Achilles heel. If they choose to keep plowing money into marketing BB10 devices across the globe, it will create a heavy cash burn unless the uptake begins to quickly gain traction.

Interest in BlackBerry has deteriorated in recent years, and consumers have grown disenchanted with the company’s offerings. The BB10 platform has come years after the introduction of iOS, Android, and even Windows Phone, and does not do enough to differentiate itself from the competition. Consumers want more, and BB10 did not have what it needed to drive upgrades.

Things are looking critical for the company. BlackBerry may have plenty of cash reserves available, but it cannot keep hemorrhaging money. Even with extra investment in the BB10 platform, I cannot see BlackBerry handsets suddenly increase their rate of sale. The smartphone maker’s ‘make-or-break’ year is not going as planned, but BlackBerry may have some steam left. The real question is, how long can they last?


Please enter your comment!
Please enter your name here