The company got a new CEO, a new operating system and new devices, but its latest numbers don’t paint a picture of revival. Blackberry / Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) finally rolled out the BlackBerry 10 OS, and introduced the Z10 and Q10 smartphones. This should have been a phenomenal quarter for revenue, smartphone units shipped, profit, and everything else. Instead, BlackBerry revealed disappointing quarterly results –made more poignant by the fact that estimates weren’t all that high to begin with. Things aren’t looking good for Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB).
Decline in Demand for BBRY Devices
The BB10 rollout continues — the Q10 is now available in nearly 100 countries and the Q5 is set to launch with 100 carriers in the second quarter of fiscal 2014 — but it is still relatively early on for the new operating system and devices.
The biggest problem for Blackberry / Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB), though, is that there’s pretty much nowhere to go but down from here. Aside from customers locked in to the BlackBerry ecosystem, there’s little demand for BlackBerry mobile devices. BlackBerry 10 is a decent mobile OS, and the Z10 is a well-designed smartphone, and those customers were very excited to finally have a device worthy of even being considered in the same league as the iPhone, or leading Android and Windows Phone smartphones. Once BlackBerry burns through those customers stuck in the BlackBerry ecosystem, though, there won’t be anyone left to sell to, according to Forbes contributor Tony Bradley.
Global Secure Data and Services Business
During the quarterly earnings call, Blackberry / Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) CEO Thorsten Heins explained, “We’ve never been a device-only company, as we are also running a global secure data network and services business, and we don’t plan to run the company with a short-term, device-only strategy.” He added “What is exciting about BlackBerry today is that we’re getting very comfortable with who we are as a company and where we will fit in the market.”
Tony Bradley noted that what he heard was, “Don’t pay attention to the low demand and pitiful performance of the BlackBerry 10 smartphones. We’re working on an exit strategy to bail on the failed mobile platform and mobile device market, and will instead position BlackBerry as a services and mobile device management company.”
Cash Stockpile Still Healthy
Blackberry / Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) has a healthy cash stockpile (US$3.1-billion or about US$6 per share) and no debt, so it probably won’t shutdown any time soon. Simple math suggests, though, that a company can only operate at a loss for so long before those reserves dry up, and it doesn’t seem like things are going to turn around for BlackBerry.
BBRY Stimulating Demand
RBC Capital Markets analyst Mark Sue points out that gross margins, profitability and cash-burn are now a concern with upcoming promotional activity. However, stimulating demand via price cuts or sales and marketing increases may be required to drive BB10 unit growth.