BlackBerry needs a miracle to meet its annual handset sales goal

23 Dec 2015 | Author: | No comments yet »

BlackBerry needs a miracle to meet its annual handset sales goal.

Struggling handset manufacturer BlackBerry on Friday released its third-quarter earnings results, which pundits largely chalked up as a big win. TORONTO: BlackBerry’s pivot to software began to show traction, after the company reported a smaller quarterly loss and its first quarter-to-quarter revenue increase in over two years, sending its stock soaring 13%. Significantly, gains in software revenue more than offset a steepening decline in legacy system access fees for the first time, and the Waterloo, Ontario-based company said this trend should continue. It was an eagerly awaited update, revealing sales numbers for BlackBerry’s buzz-generating Priv smartphone — the company’s first to run Google’s Android. The company may break even in the current quarter, but this could be complicated by investments being made toward growing both software and hardware sales, said chief executive John Chen, who sees a return to sustainable profitability in fiscal 2017, which begins March 1.

But during the call, there was a disconnect between the optimistic note CEO John Chen struck, and the actual data contained in (and conspicuously omitted from) the report. “My first goal is to get us into a break-even position with the device business, because you really couldn’t do anything strategically with a business that continues to lose money,” said Chen, as reported by Re/code. “We’re in that ballpark now.” Buying and getting the best from mobile marketing technology doesn’t need to be difficult. BlackBerry has staked its turnaround on software and more aggressively licensing its trove of patents after its once-dominant handsets conceded the consumer smartphone market. “BlackBerry hit a software number that investors have been looking for them to hit for quite some time,” said Morningstar analyst Brian Colello. “I think the investment in security, in software, is the right move.” The better-than-expected results were driven by a sharp jump in software and patent licensing revenues and a higher average selling price for phones, driven by the Priv, its new Android-powered device. “We’re planning on other Android phones, but it all hinges on how we do with the Priv,” said Chen at a media roundtable, adding the Priv will be hitting over 30 countries this quarter. Sounds like, in its first month of sales (only 22 days, from November 6 – 28), Blackberry’s Priv was a runaway hit — something we’d heard soon after launch through scattered reports of quick sellouts and limited availability. Quarterly revenue fell 31% to US$548mil (RM2.3bil) from a year earlier, but rose 12% from the prior quarter, after nine consecutive quarters of declines. Possibly that’s because the company sold fewer total handsets last quarter than it ever has before: just 700,000. (Some sources are citing that figure as the number of Privs sold, but we verified the number with BlackBerry.) That means Blackberry sold just a hair over 2.5 million handsets during the first three fiscal quarters of 2016.

Despite Chen’s assertion yesterday that the hardware division would attain profitability in the next quarter or two, he told The Verge back in October that the break even number was around five million devices annually. BlackBerry sold 700,000 devices, down from about 800,000 in the prior period, but average selling prices jumped to US$315 (RM1,355) from US$240 (RM1,032).

To hit that figure by the end of its fiscal year, BlackBerry has to sell more phones in Q4 than it’s been able to do since Q1/Q2 of last fiscal year — and it needs to break a streak of 10 consecutive declining quarters (which stretches to 16 if you ignore a slight uptick in sales between late 2013 and early 2014). Despite the tendency to assume that a new product’s sales will be front-loaded as pent-up demand is uncorked, another factor to consider is the lack of a full rollout; the Priv just hit Germany this week and has yet to be stocked by leading U.S. carrier Verizon Wireless. Second, it’s important to realize that BlackBerry is far more than a hardware OEM — and the fact that handset sales have been slipping for years now has only accelerated its push into other categories (a la HTC).

Blackberry’s recent acquisition of email client Good Technology is said to be the driving force behind its better-than-expected results this past quarter. The unfortunate truth to these numbers is that if the trend they form continues for much longer, BlackBerry may not have the luxury of choosing whether to remain in the market: Its exit will have been dictated not by John Chen, but by the even more powerful hand of the free market.

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