This morning BlackBerry released much anticipated earnings. After reviewing the earnings report, my conclusion is that it does not reveal much for a long-term investor since the company is in transition. The headline numbers were better than expected with one million BlackBerry Z10 phones sold.
Here are the reasons why celebration for BlackBerry is premature:
- The one million number about Z10 is devices shipped. It is misleading in that one million devices are now in the channel in the hands of carriers and distributors. It would be plain wrong to state or assume that one million Z10 have been bought by end users.
- BlackBerry user base is shrinking; it lost three million subscribers in the quarter.
- There has not been much doubt that BlackBerry loyalist would upgrade to Z10. The key question is what will happen after the loyalists are done upgrading?
- There is no evidence that Z10 is eating into the sales of Apple iPhones or Google Android based devices in large numbers. In the conference call, the company claims 55% of BB10 customers have come from other platforms. In my analysis, once the newness factor wears off and the number of BB10 devices being bought by end users becomes larger, the migration from other platforms will be minimal.
- BlackBerry sold 370,000 PlayBook tablets. It is important to note that PlayBooks are being heavily discounted to move the inventory.
- Revenue was down 40% year over year to $11.1 billion from $18.4 billion.
- The staggered nature of Z10 launch simply does not provide enough data about what is next.
- Many BlackBerry loyalists are waiting for Q10, a device with an actual keyboard. Q10 has not been launched yet.
