BlackBerry: It's All Downhill From Here

BlackBerry (NASDAQ: BBRY  ) investors got had. After nearly two months of waiting since the BlackBerry 10 launch event, the ballyhooed Z10 smartphone finally became available to stateside buyers on Friday, and shares tumbled nearly 8% on the day.

Were people "selling on the news"? Were they reacting to the lack of lines for the new handset? Is this just the inevitable beginning of the end of BlackBerry? Whatever the case, things won't get any prettier, folks.

My question to BlackBerry bulls is simple: How bearable was that line when you bought the Z10 this weekend? What's that? You didn't get one?

I thought so. I'm guessing that a lot of BlackBerry longs aren't even the CrackBerry addicts we used to hear so much about. They're buying into the nostalgia and brand, if they're buying at all. They're speculating on a turnaround story. But that turnaround story will be an uphill battle.

They have to know they're making a bad bet. Sure, the potential upside is ridiculous if BlackBerry's Z10 and Q10 smartphones, and the new BlackBerry 10 mobile operating system, can restore the company to relevance. But you could say the same thing about a lottery ticket.

Right now, BlackBerry is a lottery ticket.

The long road back
The days of BlackBerry as a dominant force are gone. The bulls may argue that with the smartphone market exploding in popularity, capturing even a sliver of that market today could be worth more than dominating the market five years ago.

But as our appetite for smartphones has grown, check out BlackBerry's shipments in recent quarters. The sequential declines have been sharp and consistent.

Quarter

Shipments

Q3 2012

14.1 million

Q4 2012

11.1 million

Q1 2013

7.8 million

Q2 2013

7.4 million

Q3 2013

6.9 million

Source: BlackBerry press releases.

One can argue that this trend bodes well for the BlackBerry reboot. If just 33.2 million of its 79 million users have bought new devices over the past four quarters, the demand for an upgrade this weekend should be huge.

It won't be. You know it. BlackBerry knows it. The frenzied rally that saw BlackBerry shares nearly triple between this past summer and the January peak just ahead of the BB10 launch event was unsustainable.

Even the successful companies get pinched. Don't take it from me. Take it from Apple (NASDAQ: AAPL  ) .

Even the good die young
Apple shares peaked at $705.07 last year -- on the morning the iPhone 5 hit retailers, no less. Since then, the company has shed $230 billion in market cap.

Yes, even the mighty Apple falls victim to the "sell on the news" adage, and the results have been brutal. Shares have lost more than 34% of their value, even though the iPhone 5 sold a record number of units during the holiday quarter.

Apple cleared 47.8 million iPhones this past quarter -- more than BlackBerry shipments during the five previous quarters combined -- and it still wasn't enough to please the market. Android sold far more.

Perhaps more importantly, Apple made far less per iPhone than it has in the past. Revenue per phone slipped as consumers gravitated to the older models that Apple sells at a discount. Margins took a hit, and they will continue to come in lower in the near term.

So why would things play out any differently for BlackBerry? Even selling as many smartphones as it did when it peaked during the 2010 holiday shopping season with 14.9 million shipments wouldn't be enough. Consumers expect more modest markups in the hardware, and wireless carriers are tiring of the chunky subsidies.

The market dynamics of 2013 and beyond aren't as kind for a closed ecosystem as they were years earlier, so even if BlackBerry has a hit on its hands, things won't be the same.

And let's be fair -- it probably won't have a hit on its hands.

Reality check
When BlackBerry checks in with its latest quarterly results on Thursday, it won't be a pretty sight. Wall Street's holding out for a fourth consecutive quarterly loss on a sharp drop in revenue.

The bulls will naturally look beyond that news. Yes, the arrival of BB10 devices will provide a spark, but will it be enough?

It's a jungle out there. Microsoft (NASDAQ: MSFT  ) is paying Nokia (NYSE: NOK  ) billions to back Windows Phone because it knows it needs a prolific hardware partner to go up against the demand for open-source Android platforms. It's also paying Pandora (NYSE: P  ) to put out a music-streaming app for Windows Phone users and then give those smartphone owners access to ad-free streams for the balance of the year. At some point this year, there will be more active users of Pandora in this country than there are BlackBerry users worldwide.

What chance does BlackBerry have if Microsoft is handing out blank checks to settle for a distant third-place finish?

BlackBerry began December with $2.9 billion in cash. That's good, but it won't be enough, given that developer support outside Android and iOS is something that needs to be negotiated. Without access to Apple and Android's hundreds of thousands of popular applications -- or even the handful of most desirable ones -- BlackBerry's Z10 will be toast to consumers. The enterprise market that used to demand BlackBerry will be a somewhat easier sell, but it, too, has largely caved in to the people's choice.

BlackBerry is in a tough spot. Shareholders holding out for a miracle will be in an even tougher one.

I may have nailed the top a day before shares of BlackBerry peaked two months ago. Do you want to ignore me again?

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Read/Post Comments (28) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 24, 2013, at 10:43 AM, daveraj wrote:

    You've convinced me Rick. I want a new BB more after reading this article.

  • Report this Comment On March 24, 2013, at 11:02 AM, CZZZZZZ wrote:

    Hilarious, this Blackberry bashing from the Fool is pitiful and funny, every week you sink to a new low, you are very creative writers......BBRY up 150% in 6 months, APPLE down 35%, how'ld that pair trade work out for ya suckers !

  • Report this Comment On March 24, 2013, at 11:02 AM, Jjkiam wrote:

    When you say 2.9b in cash is good,I can't possibly imagine why. This is an incredibly paltry sum to be attempting to compete against the likes of Apple and Samsung. They just don't have the resources to fund the necessary R&D investments they will need to stay competitive in an area of tech where the replacement pace is now easily 9 months or shorter. This is not minor but will doom BB to eventual failure.

    Not to mention the spec comparisons which show the new phones are at best competitive with last years Galaxy or iPhone or that the new OS still has LOTS of bugs which will haunt the early adopters. Plus no ecosystem. Patents are the only real value left

  • Report this Comment On March 24, 2013, at 11:10 AM, Oril wrote:

    Munariz, like I said before,

    Go find a real f ing job.

    What's that, you can't?

  • Report this Comment On March 24, 2013, at 11:32 AM, tonyrenier wrote:

    One carrier, one city, how many stores? Now that's research.

  • Report this Comment On March 24, 2013, at 11:33 AM, TimKnows wrote:

    The idiot speaks again! We want lineups like the un-employed at Apple events do. We are scared because the stock dropped $ .10/shr this past week. We want BlackBerry to go up even though they might have cash drop by $ 300 million while launchingthe Z10 and bringing the Q10 to market next month. And, the US is the only market in the world even though BB is sold in 150 countries. The list of stupid things from you goes on and on as usual.

  • Report this Comment On March 24, 2013, at 11:38 AM, dexter1225 wrote:

    I don't comment much but this thought just struck me...

    I picked my Z10 up on Friday. I picked it up around 6pm (after work). I like the phone; it's very responsive, the browser is stellar in comparison to browsers of the past, etc... That's neither here nor there.

    While we were finishing up my transaction, a few more people came in the store and looked specifically at the new BB. I'm not claiming there was a line to look at it, but people were interested. Another customer decided to purchase it once I was given my receipt and headed for the door.

    Why are we surprised to hear there were no lines out the door? Isn't it typically a claim by all you editorial websites that the "business folk" prefer the BB? How are "business folk" supposed to line-up when they have to work on a Friday? I saw a few people looking at the new BB - after working hours...

    Maybe the "news" here is that the unemployed, hipster, "99%" aren't interested in the new BB. I don't care, but maybe everyone should have made their checks throughout the weekend and not just at 10am on a Friday...

  • Report this Comment On March 24, 2013, at 12:01 PM, TheBigPayback wrote:

    A sign of the times: was in the checkout of my local grocery and saw someone pay for their food with EBT (the new word for "food stamps" where I live)- and he had an iPhone.

    I use a BlackBerry, and I will eventually update my phone. As a business user, I'm going to upgrade when I have time to do so: to transfer my tasks and calendar information. And to do other things, like research the plans available when I have time. As someone who works a lot, this isn't going to be day 1 at Verizon, but it'll eventually happen. People seeing no lines on day 1 as a reason the the phone will fail just don't get it.

  • Report this Comment On March 24, 2013, at 12:10 PM, technah wrote:

    This and other articles scream scared. Why is so much effort spent on telling us how bad its going to be? Keep it up, you are just proving how good the phone is. If it wasnt you wouldnt be waisting your time. In my house there are 2 Z10s, with my company picking up 60+ when current contract is up. Long lines do not matter. This quarter results do not matter. LONG BBRY.

  • Report this Comment On March 24, 2013, at 12:16 PM, Oril wrote:

    I was just in a Costco yesterday where I watched three people buy the Z10. Several more were standing there listening to the sales demo. I heard one person ask when the Q10 was coming out which of course the sales person couldn't answer but he did say the price would be higher due to the demand. No one was asking about iPhones but then of course Costco banned all apple products years ago. Judging from the crowds in the store and the overflowing shopping carts that decision likely hurt apple much more than it did Costco.

    Anyway I couldn't hang around and watch, Saturday was a very busy day for me to get my shopping chores done. You see unlike this Munariz idiot I have a real job during the week which doesn't allow me the luxury of cruising empty AT&T outlets during the workweek.

  • Report this Comment On March 24, 2013, at 12:23 PM, Winnie2013 wrote:

    A business associate just picked up his new Z10 on Friday.

    He is returning it Monday because it lacked banking and MLB and Netflix apps and Outlook sync.

    He is going with iPhone 5 for his BYOD device

  • Report this Comment On March 24, 2013, at 12:46 PM, Jjkiam wrote:

    Yes Costco banning Apple has really dented that company's sales over the last couple of years! I begin again to believe many of these posts are from paid BB bloggers desperately trying to build buzz and dismiss the slow start to the sales in this country of the new model. Hopefully some of you are actual customers for their sake. I have nothing against BB, and used one til Sept when I got the Iphone 5. One other point for me is that I would personally NEVER buy a 1st generation of any tech product let alone one with a 1st generation OS. good luck

  • Report this Comment On March 24, 2013, at 1:10 PM, tychicum wrote:

    BB should have gotten out of the hardware game long ago.

    Their strength is their server system, BBM and security.

    All of which is worth the price of admission even if run on other operating systems ... Apple and Android both.

  • Report this Comment On March 24, 2013, at 1:21 PM, Westfella wrote:

    Guys: if those guys are any good they should be working in a big investment firms, yet they do not! Just bloggers hopping to make $5 and that some investment firm will call them.

    Dismiss all this non sense

  • Report this Comment On March 24, 2013, at 2:20 PM, MrZ2357 wrote:

    You purport to know what longs are thinking but are hopelessly wrong. So let me tell you what I am thinking.

    BBRY gets to be the 3rd established smartphone vendor by worldwide market share this year and the stock doubles.

    Notice I didn't say bbry takes over the world as you seem to think I am hoping for. Mind you if it happens great.

    Another thing, why is it that when shorts make their case, they always produce numbers pre z10? As if that is in any way relevant anymore?

    I will go to my local att store and see what is going on.

    Let you know when I get back.

    Say 90 min from now.

    Finally, you say it gets worse from here.

    I say bbry goes up tomorrow.

  • Report this Comment On March 24, 2013, at 3:02 PM, Oril wrote:

    How does one get to be a blogger here?

    Do they actually get paid and if so how much?

    Someone please help me out with this because I can write better sheit than this idiot without even trying.

  • Report this Comment On March 24, 2013, at 3:10 PM, armanifitch4 wrote:

    DUMP BLACKBERRY!!! LONG NOKIA :)

  • Report this Comment On March 24, 2013, at 3:54 PM, Z10BB wrote:

    Ok, now lets go back to the facts.

    Z10 sold out at Best Buy for a price of 799$

    http://www.bestbuy.com/site/BlackBerry+-+Z10+Mobile+Phone+(U...

    96% of AT&T customers that bought the Z10 would recommend the Z10: http://www.att.com/shop/wireless/devices/blackberry/z10-blac...

    Z10 almost sold out at AMAZON

    http://www.amazon.com/BLACKBERRY-Z10-BLACK-FACTORY-UNLOCKED/...

  • Report this Comment On March 24, 2013, at 4:27 PM, Jjkiam wrote:

    Wow z10bb you have comfirmed my beliefs about paid BB bloggers. How hilarious you send links proving customer satisfaction with less that a weekends use! Now that is good comedy!!!

  • Report this Comment On March 24, 2013, at 5:59 PM, Z10BB wrote:

    Wow jjKiam, you must be slow or something.

    Here is another link for you:

    Z10 number 9 best selling Smartphone on Amazon, right above the number 10 iPhone 5.

    http://www.amazon.com/Best-Sellers-Cell-Phones-Accessories-U...

    Good luck with your shorts!

  • Report this Comment On March 24, 2013, at 6:36 PM, armanifitch4 wrote:

    buy nokia

  • Report this Comment On March 24, 2013, at 7:23 PM, TMFBreakerRick wrote:

    I see I've hit a nerve with folks that agree and disagree with me.

    I just wanted to thank dexter1225 for the perspective from the field of an actual Z10 buyer.

  • Report this Comment On March 24, 2013, at 8:32 PM, WilsoniaGoldens wrote:

    Nice article. Using information about sales of an outdated operating system to try an predict the future of the best OS in the business. We need more articles from people like you as I would like to buy more Blackberry shares.

    Sent from my Z10

  • Report this Comment On March 24, 2013, at 9:41 PM, MrZ2357 wrote:

    As promised.

    I went to 4 stores.

    1. ATT, this is a small outlet.

    The sales person and I were the only people in the place.

    No phones delivered to that store, expecting them next week. Had several inquires about the z10, no sales. Was not a proponent of the phone.

    2. A major Bestbuy store.

    No phone on display, asked about it and was told that they were locked away. Neglected to ask about customer interest.

    3. ATT major store.

    Z10 displayed predominantly at the front of the store next to the I-Phone.

    The sales rep was +ve about the phone.

    Was not plugged into the charger, so could not demo the product. At least we fixed that.

    Reported several high single digits sales.

    4. Best buy mobile. This is a store in a major mall.

    The manager pulled the phone out of her pocket and gave me an extensive demo, hub, apps, and flow. Compared it to her I-Phone and showed the 2 phones side by side emphasizing how smooth the Z10 was. Sales single digits.

  • Report this Comment On March 24, 2013, at 10:10 PM, JPseal wrote:

    No difference when the same group of analysts believe appl will hit $1000 by the end of 2012.

    Even Steve Job believe he can cure his cancer without the help of a doctor and even declared he is cured of cancer.

    Back in the 2003 the US insisted Iraq had weapon of mass destruction. UK and Australia supported them but it turned out to be a dud.

    They cannot even predict the 2008 economic crash how can we believe these fools.

  • Report this Comment On March 24, 2013, at 11:23 PM, PBS66 wrote:

    I am writing this comment on my BB PlayBook to say that I've been very happy with it for the last year+ and I've been very happy also with my Z10 for the last month+. Personally, I'm long on BBRY and sincerely hope that the company is positioning itself for success rather than for sale (as many suggest). Besides being a fan of their (new) products (esp the BB10 OS), I have been intrigued by their purchases and product positioning over the last few years, starting with QNX, not to mention some of their recent patent applications. I think they are making smart moves in the mobile space that will position them well over the coming years. Keep an eye on them, and give their products a try... They certainly won't give you a familiar iOS feel, but then again that's kind of the point.

  • Report this Comment On March 25, 2013, at 12:18 AM, sazabi1980 wrote:

    Rick, I want my 3 minutes back.

    The thing with iPhone 5 is.... I still have to open/close/open/close/open/close.

    To people who watches movies on their iPhone, go buy a TV!!

  • Report this Comment On March 25, 2013, at 10:18 AM, Pricha100 wrote:

    Every Blackberry fan made it seem like the phone was so good it would sell itself... I really did expect to see some sort of hype and people waiting in lines, but with this dud of a product launch either nobody knows or nobody cares. Probably both.

    http://bgr.com/2013/03/25/blackberry-z10-launch-att-stores-3...

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