BlackBerry's hoped-for turnaround fails to materialise

Chief executive remains defiant as slow sales of 'turnaround' phone prompt stampede out of its stock and dire predictions of company's demise

PUBLISHED : Sunday, 30 June, 2013, 12:00am
UPDATED : Sunday, 30 June, 2013, 5:45am

Thorsten Heins, the president and chief executive of BlackBerry, recalls that a year ago, when he announced a delay in the introduction of a new line of phones, he was told his company was "finished". Not so, he argued then; give us time to get this thing right.

The phones - BlackBerry 10s - are now on the market. But judging by the sales figures and earnings that BlackBerry announced on Friday, the phones have not turned BlackBerry's fortunes around; quite the opposite.

In the first full quarter of selling the make-or-break BlackBerry 10, BlackBerry reported that it shipped 6.8 million phones, of which only about 2.7 million were the new models.

Apple sells as many iPhones in a week as BlackBerry 10s were shipped over three months.

"For many, going into these earnings, it was seen as the end of the new beginning," said Anil Doradla, an analyst at investment bank William Blair & Co in Chicago. "Now, coming out of the earnings, it looks like the beginning of the end."

BlackBerry's share price plummeted nearly 28 per cent on Friday after it reported an unexpected US$84 million loss and revealed the early shipping figures of its new phone.

When asked during a conference call with investors how consumers had received the BlackBerry 10, Heins said: "We're only five months in."

He added that not all BlackBerry 10 models were available in all markets during the quarter. A version with a physical keyboard, the Q10, went on sale in the United States this month.

Heins also highlighted the company's plans to grow its software business and said: "There's more to come, more exciting products to come."

But he warned investors that further losses were likely this year as the firm increases spending on promoting and advertising the BlackBerry 10. Heins again asked for time for the BlackBerry 10 to prove itself.

But time might be short for the company that until recently was known as Research in Motion. It was not that long ago that BlackBerry was a dominant force in smartphone sales, with 55.3 per cent of the US market in 2009, according to technology analysis firm IDC. It also had a who's who of customers, including federal agencies and many large companies.

But Apple's iPhone, with its slick touch-screen interaction and downloadable apps, has eroded BlackBerry's position. A Kantar Worldpanel Comtech survey puts BlackBerry's US market share at 0.9 per cent.

The question is whether the BlackBerry 10, which can handle many of the same tasks as an iPhone or similar Android and Windows phones, can recover from its slow start.

Further worrying investors, Heins and other executives declined to say how many of the BlackBerry 10s it had shipped ended up on store shelves or in warehouses rather than in consumers' pockets.

Despite its loss, BlackBerry is not in imminent danger of collapse. It still has US$3.1 billion in cash and no substantial debt. But its future as a smartphone seller is uncertain. Because of its relatively small sales volumes, it lacks negotiating leverage with suppliers, increasing production costs at a time when it cannot charge premium prices, analysts said.