In the end, BlackBerry (BB 1.61%) 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 (AAPL 0.28%) 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 (NOK -2.30%) 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.
