Blackberry might just be turning the ship around, after recording a small profit on a handset division that has been decimated over the past few years – with the landmark being the $3.7bn write-off of unsold BB10 devices that CEO John Chen had to suffer when he took the helm. But now he has reduced the reported quarterly losses from $906m to $207m in the space of a year – and while the handset division will still be playing second fiddle to the more valuable software and services in the future, it could prove the nudge that finally shifts BlackBerry into profit, which Chen says will happen by 2016.
The results for the second quarter of the 2015 fiscal year (ending August 30) put revenue at $916m, which breaks down per division as 46% hardware, 46% services and 8% software. Non-GAAP loss was listed as $11m for the quarter, but that rises to $207m when calculated as GAAP due to the value of BlackBerry’s debentures ($167m) and restructuring costs ($33m).
By region, EMEA accounted for 40.2% of revenue, down from 3.6% a year ago; North America accounted for 32.4%, up from 26.3% the previous year; Latin America fell slightly to 12.1% from 12.5% in a year; and Asia-Pacific shrank to 15.3% from 17.6% a year ago.
But revenue is still falling, down 42% year-on-year at $916m and down from $966m the previous quarter, and is now the lowest quarterly figure since 2006. On top of this, the number of BlackBerry users continues to fall, down to 46m from 50m last quarter – and approaching half of BlackBerry’s 2012 peak of 80m users. 80% of those users are business users according to Chen.
Device sales to end customers also fell from 2.6m to 2.4m this quarter. On top of this, the revenue per user that BlackBerry generates is still falling; down from a high of $80 per user per quarter in 2002, to $15 per user per quarter in 2010, $9.50 in the previous quarter, and now much nearer $9 given the 46m users – although Chen said “we are definitely in the first half of what I referred to as the company’s eight quarter recovery, and revenue levels are bottoming out.”
The number of BlackBerry Messenger (BBM) users shows the potential that the company holds away from the devices. Currently, BBM has 91m monthly users – most probably hangovers from the days of BlackBerry’s strong device sales – and that figure grew 6% in the quarter, and up 44% from the yearly comparison after BBM was ported to iOS and Android.
But BBM might eventually be the only consumer-oriented product that BlackBerry offers. Chen has made it clear that the handset division is focusing on business customers, and the services arm is also selling primarily to business customers who value BlackBerry’s reputation in the security and management sectors. QNX has yet to rear its head on the BlackBerry balance sheet, and its potential in the connected car sphere seems vast – but so far not worth noting in the filing.
Speaking to Reuters, Ron Louks, the head of BlackBerry’s devices wing, said that now the firm has pared its losses it could afford to take some risks and release at least one unconventional phone each year. “When it comes to design and being a little disruptive, we want the ‘wow’ factor. Not all of the products will have it, but we definitely have opportunities.”
And the decision to take a few design risks appears to be paying off so far, based on the reviews of BlackBerry’s latest phone. The Passport has been praised for its 1440x1440p screen, its long battery life and its keyboard – while others criticize the keyboard (arguably the main appeal of this device, especially among nostalgic business users) because Blackberry took the decision to push the space bar up into the bottom row of letters – to give a three-row keypad with dynamic punctuation icons at the bottom of the screen.
The keyboard itself also functions as a touch-based input, allowing users to swipe through windows and move the cursor without obscuring the content on the screen, but as a means of typing it has been sharply criticized by some for desecrating the sacred QWERTY layout and being impossible to use with one hand – requiring a lengthy adjustment period for several irate reviewers.
So while the keyboard is currently a love-it-or-hate-it affair, BlackBerry already has another unconventional device in development, according to Louks, who added that the new device had already received positive feedback from carriers. “From a roadmap perspective, I’m pretty happy with where are at for the next year,” he added.
The Passport secured 200,000 pre-orders and sold out on Amazon within six hours, becoming the bestselling phone on Amazon for a short stretch of time – although neither of these factors guarantee strong sales or adoption of the Passport, given that the bulk of the preorders would have come from carriers who may likely return those that don’t leave the shops, and that the Amazon Fire Phone was also the best-selling phone on Amazon for a time and that has currently tanked by all accounts.
It is still unclear, and possibly entirely unverifiable, what the ratio of BlackBerry loyalists to new converts is in the market breakdown – and therefore hard to gauge whether it was the unorthodox design that attracted buyers who were growing tired of the endless swathes of increasingly large 16:9 smartphones, or simply excited previous BlackBerry users upgrading or returning to the fold. The apparent success and approval certainly isn’t on account of the marketing budget – as CEO Chen has cut the sales, marketing and administration budget from $400m to $195m in the latest quarter.
Chen added that the company will unveil new devices at Mobile World Congress in March 2015. He said “given the receptivity for the Passport, I know that we’ll have at least another generation of that device. I also carry very high hopes for the Classic [which will be available later this year], and there will be a new concept device too.”