In short, the letter states that despite the struggling smartphone maker's significant challenges, they want you to know "You can continue to count on BlackBerry."
We've heard this one before...
By leading off with a broad-reaching statement like that, it's very clear BlackBerry is attempting to get out in front of the perception its platform is dead.
But before you go blindly accepting this comforting gesture, let's dig in to examine the letter's claims to see if they actually hold water.
First, BlackBerry cites its goal to cut operating expenses by 50% by the end of its fiscal first quarter in 2015 -- an effort which notably began with its decision to lay off around 4,500 workers a few weeks ago -- while vaguely citing "substantial cash on hand and a balance sheet that is debt free" as evidence it will be able to continue operating.
True, BlackBerry did say at the end of Q2 it had $2.6 billion in cash and no debt. But remember that's down $500 million sequentially from $3.1 billion at the end of June, which means they just burned through nearly a sixth of their cash in a single quarter. That's also not to mention the $400 million restructuring charge BlackBerry disclosed in an SEC filing earlier this month -- but you certainly won't find that information among its press releases.
Worse yet, despite the layoffs, BlackBerry's hardware division could continue burning cash going forward, so citing the strength of its current cash position as evidence of its enduring qualities seems specious at best.
Best in class?
What's more, BlackBerry's letter also states it's important they "set the record straight on a few things," including several areas the company believes it offers "Best in Class" solutions.
Naturally, they don't need to stretch far to argue BlackBerry offers solid security and enterprise mobility management products. After all, as the letter points out, BlackBerry's Enterprise Service 10 server base did grow by more than 30% sequentially to 25,000 last quarter. It should come as no surprise, then, that BlackBerry told investors a few weeks ago that it is refocusing on the "prosumer market" going forward.
But its other claims seem to be mostly fluff, including the assertion BlackBerry provides "best in class productivity tool[s]" through its revamped portfolio of four BlackBerry 10 devices.
Remember, massive inventory writedowns stemming from weak BB10 device sales were the primary driver behind BlackBerry's stunning $965 million GAAP loss last quarter. All in all, that's why it seems more than a little silly when the letter goes on to brag that BlackBerry offers the "best mobile typing experience -- no ifs, ands or buts about it."
In addition, the letter lists BlackBerry's BBM platform as a "best in class mobile social network," a claim largely hinging upon the roughly 6 million customers who've already pre-registered to be notified of its roll out. But they didn't mention the fact that, per the company's own announcement, BBM was supposed to be released for Android and iOS nearly a month ago. Unfortunately, that release hit some stubborn, unforeseen snags which haven't done any favors in building BlackBerry's rapport.
But remember, 6 million waiting users is also minuscule in the grand scheme of things. If you recall, last month Scotiabank analyst Gus Papageorgiou was counting on BBM to grow its installed user base to at least 250 million people to support his incredibly optimistic view of BBM being worth $5 per share in BlackBerry's valuation.
I respectfully disagreed with that view, but in any case it's safe to say BlackBerry's going to need to put up significantly larger numbers for anyone to realistically consider BBM "best in class."
BlackBerry's only hope
But don't get me wrong -- there at least one possible scenario in which BlackBerry can power through these challenges.
The most obvious, of course, involves one of BlackBerry's various suitors successfully taking the company private, which would allow the new owners to infuse BlackBerry with adequate levels of much-needed capital to give them a chance to lower capital expenditures enough to return to sustained long-term profitability. In fact, that's exactly what Prem Watsa of Fairfax Financial (NASDAQOTH: FRFHF ) (TSX: FFH ) said he intends to do if he's able to follow through with the $9 per share acquisition offer he put forward late last month.
If the letter made one thing clear, it's that all the negative press surrounding BlackBerry is definitely hurting its business. Regardless of whether BlackBerry's products are indeed "best in class," competition these days is overwhelmingly driven by platform strength. Customers, in turn, make purchasing decisions based on those respective platforms. If people think BlackBerry is going away, they simply won't buy.
In the end, that's why the question still remains: Will BlackBerry be around for the foreseeable future? Maybe, but I wouldn't count on it.
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