The Most Embarrassing Thing About BlackBerry Earnings

Yesterday was a bad day for BlackBerry (NASDAQ: BBRY  ) bulls, as shares of the Canadian smartphone maker got absolutely crushed after disappointing earnings. The company shipped only 2.7 million BlackBerry 10 devices and 100,000 PlayBook tablets.

The most embarrassing part of the figures has to do with those PlayBook volumes. It turns out that daily-deals leader Groupon (NASDAQ: GRPN  ) ran a promotion at the end of May that helped BlackBerry move more than 5,000 units. That's more than 5% of BlackBerry's total tablet units this quarter.

That deal ended on May 21, and BlackBerry's fiscal quarter ends June 1, so those sales should be included in the figures just released. Like with most Groupons, the daily dealer doesn't disclose the total quantity sold. It only confirms once a minimum threshold is reached -- in this case 5,000. It's quite possible that Groupon sold well more than 5,000 PlayBooks, pitching in even more to BlackBerry's tablet volumes this quarter, but we'll never know.

Groupon isn't known for having the highest-quality customer base. Merchants have long complained that Groupon customers spend only the minimum and have no loyalty. Partnering with the company for a promotion is a risky proposition, and it's quite common for merchants to end up losing money on the deal. However, these concerns don't exactly apply in the context of selling a device.

Worse yet, Groupon inflated the "list price" of the PlayBook, presumably to inaccurately convey greater savings.

Model

"List Price"

Groupon Price

"Savings"

32 GB PlayBook

$599

$150

$449 (75%)

64 GB PlayBook

$699

$190

$509 (73%)

Source: Groupon.

Any buyers who took Groupon's figures at face value were misled. Those were the price points when BlackBerry launched the device more than two years ago, but they certainly don't apply anymore. Even BlackBerry's own site lists the 32 GB model for $179 and the 64 GB model for $219 through resellers, bringing Groupon's actual savings down to just $30. You can even buy a 64 GB PlayBook on Amazon.com for just $181 -- cheaper than the Groupon.

Source: BlackBerry.

Groupon guides its long-term take rate, what it keeps from each transaction, at 30% to 40%. At least 5% of BlackBerry's tablet volume was sold through Groupon, which duped buyers into thinking they were saving up to 75%, and BlackBerry kept only 60% to 70% of the sales proceeds after paying Groupon for its troubles.

All of this was already during the quarter of lowest reported PlayBook unit shipments on record -- no wonder that CEO Thorsten Heins doesn't think tablets are a good business.

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