The high hopes that surrounded January’s launch of the BlackBerry 10 platform were dashed again by an unexpectedly ‘brutal’ set of quarterly results, and in particular by poor sales of the touchscreen flagship BB10 handset, the Z10. BlackBerry executives started to say what they should have been saying all along ‘ that they will rely on enterprise mobility services for growth, rather than on devices.
This could be the last time BlackBerry watchers ride this kind of rollercoaster of inflated hopes followed by the same old failure to deliver financial turnaround. The Canadian’ firm’s share price crashed by the steepest amount in 13 years ‘ down 28% to $10.46, the biggest fall since April 2000 – on the results announcement, spurring renewed takeover talk.
The firm shipped 6.8m smartphones in the April-June quarter, including 2.7m of the new BlackBerry 10 models, mainly the Z10 touchscreen offering. The BB10 figure was 25% lower than analysts had predicted ‘ they had forecast a total of 7.5m shipments with 3.6m BB10 units.
While BlackBerry cited some short term factors like the Venezuela currency crisis ‘ which hurt Latin American revenue ‘ there are clearly more intrinsic problems in its latest disappointing quarter, and that was reflected in the fall in its market value, wiping out all its gains this year. Those were fuelled by a wave of optimism around BB10 which many believed was misplaced, considering the entrenched might of Android and iOS, and the presence of Windows Phone and even new OSs like Firefox as possible ‘third way’ options sought by carriers.
The company launched an all-touch BB10 flagship, the Z10, before releasing one of its more traditional keyboard models, the Q10. This was designed to reinvent itself as a touchscreen provider and get the more radical model, sporting BB10’s completely reworked user experience, into the limelight first. But those who said BlackBerry should continue to play to its installed base of keyboard users, and not delay sales of the Q10, have been proved right. The established user base is clinging to the keyboard while it seems that the Z10 is struggling to make an impact among Android and iOS consumers. The Z10 shipped in late January, initially in the UK and then in the rest of Europe and the US, while the Q10 appeared in some markets in April, but not until June in the US.
BlackBerry reported a quarterly loss of 13 cents a share, worse than the consensus analyst forecast of eight cents, while sales were $3.07bn, below the $3.37bn expected by Wall Street. ‘They missed on units, gross margin, earnings,’ Kevin Stadtler of Stadtler Capital Management told Bloomberg, echoing the despondency of most shareholders. ‘It’s been a disappointing launch so far.’
CEO Thorsten Heins tried to stay positive, telling analysts on the earnings call: ‘BlackBerry 10 is still in the early stages of its transition. In fact, we are only five months in to what is the launch of an entirely new mobile computing platform.’ However, BlackBerry’s subscriber base fell to 72m worldwide, down from 76m in the previous quarter and 79m in the period before that. BlackBerry’s share of the global smartphone market declined to 2.9% last quarter from 6.4% a year before, according to IDC figures.