BlackBerry’s Muddled Quarter Ends with Losses

BlackBerry’s Q10: Savior device?

It was an odd fiscal quarter for BlackBerry: although the struggling smartphone maker reported a rise in revenue and device shipments, it still took an $84 million loss. That sent the stock plunging in early trading June 28, as Wall Street apparently expected the company to continue its recent habit of narrow profits.

For its Q1 fiscal 2014, BlackBerry reported revenues of $3.1 billion (up 15 percent from last quarter), cash flow from operations of $630 million, and $3.1 billion in the bank (up from $2.9 billion from last quarter).

BlackBerry also declined to break out sales of its new BlackBerry 10 devices, which have now been on the market for a full quarter. Instead, it announced quarterly shipments of 6.8 million BlackBerry smartphones and 100,000 BlackBerry PlayBook tablets (which will not be upgraded to BlackBerry 10; the company, it seems, has started to lead its tablet experiment out to pasture). BlackBerry needs BlackBerry 10 devices to become a hit with consumers and businesses if it wants to stay viable in the ultra-competitive smartphone market; by not revealing those sales, the company opened itself to questioning over whether the platform is performing as well as hoped.

In addition to a pair of “hero” devices loaded with top-quality hardware (the Z10 and Q10), BlackBerry has unveiled the Q5, a device with a physical QWERTY keyboard aimed at the midrange global market. If BlackBerry can’t yet challenge the mobile market’s Apple-Google duopoly, it can make a strong play for third place—so long as Microsoft’s Windows Phone doesn’t significantly expand its user-base.

BlackBerry also faces the prospect of new smartphone operating systems—including Mozilla (with Firefox OS) and Canonical (pushing Ubuntu for mobile devices)—taking their own slices of the mobile-market pie. “Underpinning the worldwide smartphone market is the constantly shifting operating system landscape,” Ramon Llamas, research manager with IDC’s Mobile Phone team, wrote in a May 16 note. “Android and iOS accounted for more than the lion’s share of smartphones in the first quarter, but a closer examination of the other platforms reveals turnaround and demand for alternatives.”

Whether BlackBerry 10 can succeed in such a crowded environment depends on two things: reinvigorating longtime BlackBerry fans (and convincing them not to jump to a rival OS) while pulling in new users who are either buying smartphones for the first time or sick of iOS and Android. That puts a lot of pressure on BlackBerry’s software and apps to out-innovate and outperform rivals.

Meanwhile, BlackBerry anticipates its operating losses continuing through the second quarter. “The company will also continue to implement the cost savings and process-improving initiatives it started last year,” read the Outlook section of BlackBerry’s earnings report, “in order to drive greater efficiency throughout the company.” Whether that means additional layoffs and cutbacks remains to be seen; considering how BlackBerry (back when it was Research In Motion) has already undergone several rounds of brutal layoffs over the past few years, there may be a scarcity of meat left to cut from the proverbial bone.

 

Image: BlackBerry

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