BlackBerry Races Ahead and Then Stalls Out. Is BB10 a Hit or Not?

Shares of handset designer BlackBerry (NASDAQ: BBRY  ) jumped as much as 10.5% overnight on about double the stock's normal trading volume. But most of the gains faded fast, and BlackBerry traded just 2.4% above Wednesday's closing price at 1:30 p.m. EDT.

The company reported fourth-quarter results this morning, and it was a mixed bag. Sales fell 36% year over year to $2.7 billion and missed Wall Street's $2.8 billion targets. But adjusted earnings of $0.22 per share were a welcome change from the expected $0.31 per-share loss.

The company's cost-savings program was completed one quarter ahead of schedule, leaving BlackBerry with lower operating costs and a more efficient business model. The so-called CORE program should reduce operating overhead by $1 billion annually going forward. Without this intiative, the company would have reported a significant loss this quarter.

BlackBerry also enjoyed $112 million in tax benefits this quarter. That's another line item that makes the difference between positive and negative earnings. So it's not like the long-awaited BlackBerry 10 launch saved the company's bacon single-handedly.

Is the Z10 handset saving BlackBerry's bacon or not? Nobody knows.

CEO Thorsten Heins hammered home the message that customers are excited about the new platform, and early sales are strong. Don't forget about that record-breaking million-unit order, folks! Also, the keyboard-equipped Q10 hasn't launched yet and should appeal to BlackBerry's core fans in a way that the touchscreen Z10 never will.

On the other hand, Heins avoided questions about expected and actual unit volumes like an Olympic-grade dodgeball champion. Here's a telling sample:

"There's a huge dynamic in the market, what is flowing in, what is already flowing out. So don't take it really kind of like a clear number, but what we see roughly is that from what we have shipped into the market, two-thirds to three-quarters already have sold through."

In other words, we should all get excited about BB10's lifesaving powers, but let's not get too specific about expectations. Also, Heins said he sees "strong marketing support" from American launch partner AT&T (NYSE: T  ) , which doesn't seem to jibe with field reports on Z10-pushing in Ma Bell's stores.

So the raw numbers look promising, but management didn't inspire a whole lot of confidence in BlackBerry as a sustained turnaround story today. There's nothing in here to change my long-term view of the company and stock, which is a solid thumbs-down CAPScall

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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 28, 2013, at 1:58 PM, TimKnows wrote:

    But we have already determined that your opinion isn't worth anything. Are you planning on always being a Fool?

  • Report this Comment On March 28, 2013, at 2:26 PM, SyDVooh wrote:

    Heins made a big deal about how half of the one million Z10s sold were to former users of other platforms, but also announced the they lost 3 million subscribers in the same quarter. Not good. They also didn't give real "guidance" about USA sales of Z10, and if the early numbers were good, then you know we would have heard about it today.

  • Report this Comment On March 28, 2013, at 2:57 PM, jakersnaker wrote:

    Everyone is making a big deal out of this subscriber base loss and shouldn't be...yet. Loss of 3M subscribers doesn't mean the same thing as it did last quarter. In the first month, BlackBerry sold through lets say 2/3 (to take the lower) of the 1M units shipped. That means 660,000 people added a BlackBerry ID (as BB10 is new and had no BBID's related before Feb). Of the 3M subscriber loss, 660,000 of those are offset then by switching from legacy handsets or by new users.

    Interestingly enough what these numbers also show is that if 55% of the sell through units are to those that are switching from iOS, Android or other OS, and are then new users to the platform, BlackBerry stole 363,000 new customers from other platforms in just under a month.

    Remember BBRY controls say 3% of the smart phone space right now in the US. If ATT, Verizon and TMobile each sell 1 BB10 device out of every hundred total devices sold they already come close to matching that market share. If Verizon, ATT, TMobile sell 2 each that's just under 6%, 3 is about 9% etc.

    PLUS!!!, The Q10, MDM and other services which we didn't even touch upon. Subscriber revenue will be offset and more by this.

    Oh!! and a 40% margin on their devices.

    So...its all a moot point.

    Look for a drawn out short squeeze.

  • Report this Comment On March 28, 2013, at 3:32 PM, lborsato wrote:

    @jakersnaker your math is a bit problematic. You're talking about share of sales, NOT market share.

    US smartphone penetration is about 55% (www.marketingcharts.com/wp/topics/signs-of-whats-to-come/as-..., or about 172.7 million phones. BB has has 3%, or about 5.2 million phones.

    To increase their market share by 1% they would have to sell an additional 1.7 million phones on top of the 5.2 million, or 6.9 million phones, assuming all else remains constant. Using your 1 in 100 idea means that the other companies would have to sell 690 million phones.

  • Report this Comment On March 28, 2013, at 4:03 PM, Pricha100 wrote:

    Also, Jakersnaker I don't know if you can suddenly subtract 666,000 subscribers from the 3 million lost, when it ALREADY should have been accounted for in the period up to which they were reporting.

    Meaning that its already been offset! It is 3 million NET loss in subscribers. In that sense you should actually ADD the 666,000 to the 3 million to get an idea of the total number of lost subscribers before your new activations.

  • Report this Comment On March 28, 2013, at 4:09 PM, Pricha100 wrote:

    Scratch my previous comment, just read the parenthesis about no BBID before February. My bad.

  • Report this Comment On March 29, 2013, at 12:56 AM, sliderw wrote:

    The mobile market, at least in the US, is dominated by two major platforms. Long term, it can support one or two major platforms, but not three. BlackBerry is fighting for -- not owning -- the third spot. Its future is worse than doomed.

  • Report this Comment On March 29, 2013, at 3:41 PM, infektu wrote:

    And you expect to get the answer to the question in your title by watching the market activity? Good luck, trying to do this is doomed, unless of course, one is part of the press-controlling clique.

    @lborsato

    Subscriber delta is _always_ net. Last quarter RIM could have "gained" 14M users and "lost" 15M users, for all we know.

    Once Z10 becomes widely available and with Q10 phasing in it's expected that the numbers will stabilize and then start to improve again. Simple math points to 12-15M shipments and with a HW margin back to 45% this is nothing to sulk at.

  • Report this Comment On March 29, 2013, at 3:48 PM, infektu wrote:

    Sorry, my previous comment was directed @Pricha100.

    For those like sliderw who think that (at least the US) market only supports two platforms they should live in such a world for a week or a month. Funny how we need 2M apps but only two platforms...

  • Report this Comment On June 08, 2013, at 2:07 PM, misledbyfools wrote:

    Here is some other research as quoted above.

    http://gs.statcounter.com/#mobile_os-ww-weekly-201323-201323...

    for worldwide and below for US only

    http://gs.statcounter.com/#mobile_os-US-weekly-201323-201323...

    So windows and blackberry have been neck and neck in the US.

    In the world including the US, (although some think that the US is the world) ......BB is 2.5 X more than windows.

    The data is similar for the out of data time period of the research referenced in this article, so chew on that.

    Article headline should read.....

    "WINDOWS AND BLACKBERRY STILL NECK AND NECK IN THE USA"

    followed by.......

    "WINDOWS STILL WELL BACK OF BLACKBERRY WORLDWIDE"

    Anyway, whatever data this Kanatar Worldpanel had for April 2013, it is outdated and well behind the curve to be useful regarding the stock. Keep in mind that the out of date data they release for free to the public serves their paying customers only and they received the data months ago. Do not let this data from Kanatar influence your stock decisions now.

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