• 12/20/2013
    12:56 PM
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Can BlackBerry Be Fixed?

The smartphone maker's quarterly results were abysmal, with a loss of $4.4 billion on shipments of only 1.9 million smartphones, mostly older models.

BlackBerry's third fiscal quarter was brutal. Sales of its smartphone plunged to new lows and the company was forced to take another writedown on unsold device inventory. The smartphone maker may have revealed a new turnaround strategy, but its success is hardly assured.

The company shipped approximately 1.9 million BlackBerrys during the third quarter, down nearly 50% from the previous quarter's shipment of 3.7 million. Most of the handsets it sold run BlackBerry 7, its previous-generation operating system. It sold almost no new BlackBerry 10 devices. BlackBerry's retail partners sold through a lot of their channeled supply, but BlackBerry didn't count those as new sales or shipments. Those partners sold a total of 4.3 million BlackBerrys. Again, most of them were older BlackBerry 7 models. No one, it seems, likes BlackBerry 10 very much.

To put this into perspective, Apple sold more than 4 million iPhones the first weekend the iPhone 5s and 5c went on sale in September.

BlackBerry lost $4.4 billion on revenue of just $1.2 billion. In the previous quarter, BlackBerry lost $965 million on revenue of $1.6 billion. Most of the loss can be attributed to writedowns and charges. Magically, the company still has $3.2 billion in cash or cash equivalents on hand. BlackBerry can thank Fairfax Financial Holdings for its large investment last month for this.

[The enterprise is looking for a new mobility partner. Will iOS 7 Be The Next BlackBerry?]

Things look bleak, but BlackBerry said it has a plan to get back on track.

First, it is restructuring its business units into four pillars: Enterprise Services, Messaging, QNX Embedded, and Devices.

Its Enterprise Services division is already in fairly good shape. The company claims to have 30,000 BES 10 serves in use or in testing. Its global enterprise customer base exceeds 80,000, making BlackBerry the largest mobile device management provider.

Messaging is going fairly strong, too. BlackBerry Messenger, for example, has proven surprisingly popular on Android and iOS devices. The company claims that it has scored more than 40 million downloads of the application since its release two months ago. BlackBerry didn't say what its total user base is, but is should be close to, if not over, 100 million. BlackBerry has even scored some wins with competitors such as LG, which has agreed to preload BBM on its Android smartphones moving forward.

BlackBerry's QNX Embedded and Devices businesses are much more questionable. The company says it is going to unveil new cloud-based technology for cars at the Consumer Electronics Show next month. BlackBerry purchased QNX several years ago and it forms the underpinnings of BlackBerry OS 10. It has long been used in cars. Looks like BlackBerry is bringing QNX back to its roots.

The company has struck a partnership with Foxconn, which manufactures Apple's iPhone, to make a new, low-end smartphone for emerging markets. The device will be limited to 3G wireless, but will run the newer BlackBerry 10 operating system. The device may arrive as soon as March or April, and it will first target Indonesia.

CEO John Chen

One thing seems to be painfully clear: BlackBerry's Z10, Q10, and Z30 smartphones can't compete with Android, iOS, or even Windows Phone. Given BlackBerry 10's utter failure in the market, it's a wonder BlackBerry doesn't can the hardware business entirely.

"With the operational and organizational changes we have announced, BlackBerry has established a clear roadmap that will allow it to target a return to improved financial performance in the coming year," said John Chen, BlackBerry's CEO. "While our Enterprise Services, Messaging, and QNX Embedded businesses are already well-positioned to compete in their markets, the most immediate challenge for the company is how to transition the Devices operations to a more profitable business model." No kidding.

"We have accomplished a lot in the past 45 days, but still have significant work ahead of us as we target improved financial performance next year," added Chen. "However, the company is financially strong, has a broad and trusted product portfolio to work with, a talented employee base, and a new leadership team dedicated to implementing our new roadmap."

Chen has only been with the company a short while. His plan may keep the company alive for a short period, but it's certainly not going regain its stature as a premier smartphone maker. Those days are past. Perhaps BlackBerry can survive as an enterprise device management company. Perhaps it can't.

Eric Zeman is a freelance writer for InformationWeek specializing in mobile technologies.

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BlackBerry's Next Act

Drop the smartphone hardware entirely and focus on device management? What do you think, readers? Would the company be wise to pursue that approach? Or should BlackBerry sell off the pieces it can because the game is over? Weigh in.

Re: BlackBerry's Next Act
I seem to recall that there was another company that hired a new CEO who decided to go in that direction. It was a small company called Hp. Remember what happened there? They hired a CEO that knew software, but knew nothing about hardware. That's what they've done here. The difference is that Hp wasn't on the edge of going out of business, even though they've had their problems. The problem here is that it's simply too late. What's being forgotten is that without robust hardware sales, there's no need for BES BB10. It doesn't manage Android and iOS very well. Certainly no better than a myriad of other MDM's. And, as far as I recall, the totality of MDM business last year was about $500 million. Even if Blackberry gets a good chunk of that, unlikely as it may be, that's a tiny fraction of what their business has been. It's wouldn't be Blackberry anymore but some small vendor indistinguishable from all the others. And what about that vaunted new multi platform BBM? Well, what of it? A big deal is made of the supposed 80 million users. Hey folks, that's not a lot of users! Apple's iMessage has at least five times as many. And if Google decides to do one, they will have 20 times as many. And the carriers are giving texting, messaging and mail away for free with the new plans.Then they have to monetize it. I've been bringing this point up since it was first shown. Now Chen is saying they may have a monthly charge for BBM for those users on BES. What a wonderful idea. Charge for a free service. Or they may have Ads. Another idea that users will love. I believe that 53% of their $1.2 billion was for services and software this past quarter. That would give them about $2 billion in sales for a full year. But that's assuming that those services and software aren't falling as their hardware sales are. I think they will, if they are not already. After all, a lot of those services and software depend on those hardware sales. No hardware sales means lesser services and software. There are doubts that Blackberry can bring BES BB10 for Android and iOS to where it is for BB10. If not, what's the point? And what's the point to the survival of Blackberry itself now? Very little. It's understandable that a company will do everything possible to save itself, but when they put themselves up for sale and received no serious offers, that should tell us something. I see investors ran the stock up by 15% today. They are living in a dreamworld.
Re: BlackBerry's Next Act

I agree you @Laurianne, infact i am not so optimistic about their cellphone market although people have been saying that they the can still survive if they improve on the user interface and application market, although i dont agree to this, rather i guess they can be a force, as cellphones are not the only thing they do.

Re: BlackBerry's Next Act

When BB started to falter I siad that it was time for them to back off of the mobile devices and really push BES or their expertise in device management.  BES is the best thing that BB ever did in my opinion, I was never a fan of their phones but the management of applications, OS versions and provisioning is why they did well in the corporate markets.  That is what I see lacking now in the mobile device world and I'd love to see them push forward into that niche. 

Re: BlackBerry's Next Act

BB laged in the BES product in the market as well as their mobile phones.  Microsoft, Citrix, Cisco and others offer centralized management of heterogenous mobile devices.  BB did nothing but rake in profits for too long without any new innovations.

Re: BlackBerry's Next Act

Toward the end, yes BB did sit back and act as if nothing was changing but in the early days BES and GoodLink were incredibly useful for managing devices and I spent a lot of time with both.  RIM failed to see the tides changing direction, if they had seen the impact of the iPhone coming I have no doubts the first two generations of iOS and Android wouldn't have been so lacking in connectivity to enterprise solutions.