2.7 Millions Reasons for BlackBerry to Worry

In the end, BlackBerry (NASDAQ: BBRY  ) couldn't live up to its own hype.

Shares of the smartphone pioneer are getting crushed today after posting disappointing quarterly results, but the most damaging nugget in the bloodbath is that BlackBerry moved just roughly 2.7 million Z10 and Q10 devices. 

I wasn't the only one bracing for a bad report. The surprising loss wasn't much of a surprise. The sequential crush in gross margins during a new product cycle, and the spike in marketing overhead to get noticed, weren't shockers. However, clearing just 2.7 million of the new devices -- and that's how the cruel math plays out when BlackBerry concedes that just 40% of its 6.8 million shipped smartphones during the quarter were handsets running its new BB 10 mobile operating system -- is the ultimate deal-breaker.

When Apple (NASDAQ: AAPL  ) sold just 5 million iPhone 5 devices in its debut weekend in the fall, many pegged that as a disappointment. When Samsung announced that it cleared 10 million Samsung Galaxy S4 smartphones in its first month, the discussion eventually evolved into inevitable slowdowns at the supplier level.

How does it feel to ship as many new model smartphones in three months as Apple cleared in a little more than a day?

BlackBerry isn't going anywhere. This isn't about that. Thankfully its balance sheet is flush with billions in cash. However, the ball of hype that found the stock nearly tripling at one point between bottoming out last summer and peaking earlier this year with the BB 10 unveiling has lost its bounce. 

When iOS and Android devices ran into resistance a few months ago, it seemed as if this was an opportunity for the fringe players. BlackBerry seemed to be introducing a substantial upgrade to its mobile operating system at the ideal time.

Shares of Nokia (NYSE: NOK  ) and BlackBerry went on to more than double off of last year's lows. The market sensed that the time was ripe for Nokia's Lumia smartphones, and BlackBerry's BB 10 handsets, to carve out sustainable niches in a market that seemed to be fragmenting.

Well, it isn't happening.

It's not just BlackBerry crashing down on the reality that even a sliver of a seemingly booming market may not be enough. Bernstein analyst Pierre Ferragu reiterated his bearish rating on Nokia yesterday, and his $1.95 price target implies that the stock will shed half of its value.

We may one day come to an era where smartphones are truly operating system-agnostic, just as PCs are now becoming in an era of cloud-based solutions. However, for now, that's just not happening. It's an iPhone and Android world, and that's just not changing. 

BlackBerry bulls probably thought that more of the platform's more than 70-million users would hop on the new BB 10 devices within months of hitting the market. They overestimated the fan base, and it will be hard to believe in BB 10's long-term prospects now.

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Read/Post Comments (7) | Recommend This Article (3)

Comments from our Foolish Readers

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  • Report this Comment On June 28, 2013, at 6:59 PM, PaulApp wrote:

    BlackBerry phone design led to their diminish!

  • Report this Comment On June 28, 2013, at 7:14 PM, tundrowalker wrote:

    I still think BB has good long-term growth outlook. I think the $4 price drop today was from all the day-trader wanna-be's that were hoping the quarterly report would bring a quick rise.

    Sadly, BB is in day-trader territory. Most folks are not tossing $ into it to hold for years while it builds back up. They want immediate gratification. They want to invest today, and double their investment tomorrow. And, most of the traders don't care about BB or its products or innovation. They just want the net increase on return.

    I went into BB with long-term investment ideals, and I'm sticking with that. I believe in their R&D, their product line is good and will only get better, etc, etc (too many posts regurgitating this, so I'll spare you.) They have a solid chance of not just getting back on their feet but becoming the next Apple several years down the road. Folks will scoff now, but only time will tell.

    Since the stock slipped from day-traders bailing, I'm tempted to buy up more shares now.

  • Report this Comment On June 28, 2013, at 9:46 PM, MrSmith210 wrote:

    Lol. Phone design was the diminish? Or day-traders? Are you guys kidding me? They sold 2.7 million in THREE MONTHS. Apple sold that in ONE DAY. That's why it's tanked. Or "slipped" as that commenter said it. Lol. Slipped. Shedding 25% in a day isn't a "slip". BBRY is done boys. Sorry. Oh how I wish I could find all those BBRY and NOK bulls from earlier this year and late last yr that I had many arguments with in various comment section. Where are you now BBRY and NOK bulls? Hello?

  • Report this Comment On June 28, 2013, at 10:57 PM, Oril wrote:

    You are right about one thing, blackberry isn't going anywhere, it has been around for a long time and will be around for a long time to come.

    How many companies do you know that can post a quarterly loss while at the same time increasing its cash in the bank? That's what it is all about, its all about the money.

    Blackberry doesn't need to beat Apple or Samsung. it doesn't need to ship more phones than Microsoft or Nokia to be successful. It just needs to keep doing what it is doing which is staying out of debt and putting more money in the bank.

    So the stock dropped twenty five percent today, do you think that matters to Thorsten Heins? It doesn't, he is still shipping phones and he is still putting money in the bank. Probably what bothers him the most is having to do these annoying quarterly reports and putting up with whining investors and writers like you.

    So until someone buys this little moneymaker out or takes the company private put your crystal ball away and get some skin in the game.

    Blackberry was a buy last Friday and remains a buy this Friday. Yesterday was a sell because only a fool would hold through earnings. And it takes a bigger fool to still be short after today.

  • Report this Comment On June 29, 2013, at 1:41 AM, sliderw wrote:

    @Oril

    A tanking stock price doesn't matter to the CEO? Not in America!

    Why, you ask? His stock-based compensation. His employees with stock-based compensation. Angry shareholders with voting power. Probably a few more reasons.

  • Report this Comment On June 29, 2013, at 10:16 AM, HelpIsHere wrote:

    The only downside to yesterdays report is these dumb articles. We will never hear the end of this dribble until BlackBerry out sells Apple and they go under. That's a high bar to clear but this nonsense is what gets clicks and makes want-a-be analysts earn pennies per day. The company basically missed by $ .03/shr ex-Venezuela. They didn't forecast unit sales, you did. They didn't sell Q10's in America during the time of the "Q" in question, yet you claim they have failed on the basis of one product. Go back and look at Apple's first phone launch, truly laughable there. I could go on but this article isn't worth my time.

  • Report this Comment On June 29, 2013, at 1:57 PM, robmxa wrote:

    MrSmith210, here is one Nokia bull. See NO reason to change my thinking on Nokia. Love my Lumia 920 but will exchange it for the new 1020 with the 41 MP camera as soon as it comes out.

    Nokia will be #1 again. Best camera, call quality, build, design, maps and all other smartphone companies either are or will be paying royalties to Nokia.

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4/17/2014 4:00 PM
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