BlackBerry: The Decline Begins

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It’s easy to feel a little sorry for BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB). The devices produced by the mobile phone manufacturer were once ‘must-have’ items, and indeed at one time BlackBerry was virtually a short hand for smartphone. Of course, all that changed. The iPhone in particular has been an absolute game changer, and the BlackBerry has been relegated into the position of an also-ran next to the Apple Inc. (NASDAQ:AAPL) smartphone, and other big players in the mobile marketplace such as Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930).

The history of the technology sector tells us that there is not always a correlation between quality, innovation and success, particularly in consumer electronics. There have been many products over the years which looked like surefire winners, and which included stand-out tech features. Yet, they have often been hammered down into extinction by competitors which understood a particularly significant element of the marketplace, or offered something which carried particular consumer cachet.

The decline of BlackBerry

The decline of BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) could very well be cited as such an example. This has not been predicated on the company producing sub-par products; in fact the recent BlackBerry device, the Z10, actually received very favourable reviews, and would once upon a time have been glued to the ear of every second businessman and woman that one encountered on the high street. The BB10 operating system which was installed in the device was also praised, and devotees to the Z10 consider it to be every bit as good, if not better, than every other smartphone on the market.

Unfortunately, there was a minor obstacle for BlackBerry devices receiving widespread market acceptance. It was called the iPhone 5S. It must have been rather painful for BlackBerry owners and shareholders watching hordes of people queue around the block to get their hands on the new Apple handset, while BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) had to cope with sales that were far less than hoped for and anticipated. While BlackBerry managed to sell 3.7 million smartphones during the second quarter of 2013, Apple Inc. (NASDAQ:AAPL) sold over 9 million units of their new device in just one weekend.

BlackBerry’s losses

It was hardly surprising then that the second quarter financial figures for BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) were pretty woeful. The Canadian smartphone manufacturer reported losses of $935 million, which were attributed to poor uptake of the Z10; the device that was supposed to save the company. Under the circumstances, as much as many of us may feel some affection for the smartphone manufacturer, its future did seem to be teetering on a precipice.


When placed in this context, it becomes quite clear that today was a huge day for BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB), as its latest financial figures were announced. And those investors and people involved with the company on an operating level might reflect that there was something of a paucity of good news from these particular figures.

The headlines from the announcement of these figures are already entirely negative. The headline in the Huffington Post – ‘BlackBerry Reports Massive Losses (Again)’ – rather sums up the media reaction to the smartphone manufacturer’s latest figures. It’s probably at times like these that the board and upper echelons of a company wish that they could just keep their financial figures to themselves, although this would hardly be likely to be met with a favorable market reaction.

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Dismal sale figures and shipments

Every single financial indicator for BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) was worse than expected, and predictions before the figures were released were hardly favourable. Undoubtedly the income and profit (or lack thereof) figures will garner the most attention, but arguably the most telling figure to come out of the announcements from BlackBerry was the dismal sale figures and shipping of mobile devices that the company achieved during the quarter. Obviously, this is BlackBerry’s absolute core business, and if these figures are bad then it’s hard to see how they can turn things around.

Unfortunately, the figures were worse than bad. BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shipped only 1.9 million handsets during Q3, which was only just over half what was expected by analysts (3.3 – 3.6 million). The company was also $200 million down on their estimated income, and reported a reported a $4.4bn third quarter loss to the market, after writedowns and impairment charges. Shares of BlackBerry dropped 6.2pc to $5.86 on pre-market trading, but have rallied somewhat since then.

BlackBerry Price Target

Competition for BlackBerry getting harder

When one encounters such dismal economic figures, it is not exactly surprising that the company has been seeking a buyer in recent months. Yet even this scheme was abandoned just last month. Standing up to the might and appeal of Apple Inc. (NASDAQ:AAPL) is no easy task, and it was hard to see much light on the horizon for BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) after perusing their Q3 figures.

The news that BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) has agreed a deal with Foxconn for the manufacture of their products in the future may please the market, considering that the China-based company has a large amount of experience with manufacturing consumer goods for the likes of Apple Inc. (NASDAQ:AAPL) and Sony Corporation (NYSE:SNE) (TYO:6758) (though it will do little to improve the image of BlackBerry in the eyes of those that are critical of Foxconn’s labour practices in particular). And it shows that the company is not standing still in the midst of these poor figures, they are attempting to modernise their practices and create a viable business model.

But it seems absolutely telling that the company chose today to release this titbit of news. It was an attempt to provide the market with a few crumbs of cheer in what is otherwise a soup of gloom. It would be impossible not to fear for the continued existence of BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) in the medium to long-term, at least in its current, independent form.


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