Thorsten Heins brings BlackBerry back in black

CrackBerry analysis following BlackBerry's Q4 earnings report and conference call.

Thorsten Heins
By Chris Umiastowski on 28 Mar 2013 12:20 pm EDT
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In celebration of a highly respectable earnings report from BlackBerry, I’ve got the AC/DC cranked up playing “Back in Black”.  It has speed, energy, and in that classic rock sort of way it represents the return to profitability that we’re seeing from our friends in Waterloo.

This morning BlackBerry reported Q4 results and held their usual conference call.  We listened.  We live blogged.  Now I’m going to do my best to share my thoughts without writing a novel.  Because believe me ... I could.

Back in Black

BlackBerry posted a surprise profit for the quarter.  On a GAAP basis EPS was $0.18, and on an adjusted basis (excluding restructuring, mostly), it was $0.22.  The adjusted number is what the Street looks at compared to their own models.  Analysts expected the BlackBerry to lose $0.31 per share, so this beat is quite meaningful. 

Revenue was $2.7 billion, flat with last quarter and lower than the $2.83 analyst estimate.  However, the company delivered stellar 40% gross margin, boosting the gross profit figure while holding operating expenses approximately flat.  This explains the nice upward moves in profit.

They sold 6 million handsets in the quarter, which is down sequentially, and weaker than analyst estimates of 7.1 million device sales.  That said, the sell through was 7.9 million devices compared to about 8.4 million last quarter. 

Service revenue declined about 3% sequentially, which isn’t too bad.  These revenue dollars are slipping away slowly.   More on that later.

Cash performance was stellar.  They’ve maintained $2.9 billion in the bank, which is impressive considering the launch and restructuring expenses they had to deal with in the quarter.  It seems to me  they’ve now turned the corner, operationally, and they’ve got a lot of cash in the bank.  A couple of quarters ago I was very worried about collapsing service revenues, restructuring charges, and the ramp expenses for BlackBerry 10.  They’ve navigated this way better than anyone expected.  That’s a big part of the reason the stock is up over the last few months, obviously.

With all of the news now digested and the market open, as I write this, the stock is hovering at just  under $15.00, up almost 2.5% so far.

BlackBerry 10 Update

About one million Z10 devices were sold in the quarter, which lines up bang on with analyst estimates.  Sell through is estimated, in an answer provided by Thorsten, at 2/3 to 3/4 of that amount.  In the Q&A session I wasn’t too thrilled with their answers about sell through because they act as if it’s too early to measure whereas they should have near perfect information.  Every device that gets sold gets registered with a BlackBerry ID (and PIN).  We all know this. 

Anyway, some people are going to make a big deal about the sell through being less than 100%.  Those people are fools.  Guess what people?  If sell through is 100% it means there is no inventory in stores, and nobody can buy phones.  You need inventory in the system to operate a business.  Get a clue.  I’m not saying this to CB readers, either.  I’m saying this to those people who are supposed to be professionals and who still don’t get this utterly basic logic.  But that’s another story.

The most impressive metric, to me, was the fact that 55% of Z10 buyers are coming from other platforms

The most impressive metric, to me, was the fact that 55% of Z10 buyers are coming from other platforms.  I’d like to point out that this doesn’t mean purely iOS and Android, although certainly some users are making that switch.  The definition of “other platforms” wasn’t given, but I’m betting it includes feature phones.  So the Z10 may be attracting people who are first time Smartphone buyers as well as migration from other Smartphone platforms and BB6/7 upgrades.  Either way it is an impressive metric.  A few months ago the bears said that BlackBerry 10 stood no chance except with its existing customer base.  This has been proven 100% wrong.

BlackBerry 10 has launched at 60 carriers in over 40 countries.  There are still 30 countries left to be launched at this point.  A total of 220 carriers have approved the Z10 for their networks, and it will be launching on them soon. 

The Q10 is now in testing with 40 carriers in 20 countries.  A lot of die-hard BlackBerry users refuse to give up their physical keyboards, and when the Q10 hits the market in April we should see a nice spike in sales. 

Thorsten also made it crystal clear that BlackBerry 10 will be a complete portfolio with devices launching throughout the fiscal year.  Specifically, at least one mid-level device should hit by mid year.  Q2 ends in August, so I’d say we are looking at late summer for these new phones. 

Subscriber base shrinking, but poised to recover

BlackBerry reported 76 million subscribers at the Q4 quarter end, which is down from 79 million as of Q3.  The loss of 3 million subs is bothersome, but you can’t really say it’s unexpected.  The Z10 had only been on the market for a month by the close of the quarter, and  we’d seen the start of the global decline in subscribers in Q3.  Usually these things just start to accelerate, meaning  that BlackBerry pushed the launch of “the 10” about as far as they possibly could have.  If they had waited any longer the subscriber loss flesh wound would have become more of an gun shot to the femoral artery. 

Let’s do some simple math here.  Let’s say BlackBerry sold about 750,000 Z10s to end customers, but still lost 3 million subscribers.  This means about 3.75 million people gave up their older BlackBerry devices, which have service revenue attached.  Does this jive with a 3% decline in service revenue?  Yes.  Because you have to remember that enterprise use has higher revenue, and is stickier than BIS use.

By Q1 I think we should see subscriber losses dramatically slow down.  I don’t think the sub base will grow in the May quarter, but I think it will be pretty much flat.  The Z10 and Q10 will add more users, while certainly some people will still leave the platform.

And as people upgrade to BB10 the company will lose out on service revenues.  But they’ll make up for it with immediate gross margin contribution, which helps EPS.  This is why I think the stock is likely headed into a period of positive financial momentum.  Will this help the stock price?  I think in a logical world it does.  But the world isn’t always logical. 

We’re much closer to the starting line than the finish line.  BlackBerry’s comeback has only just started, and we can’t judge it quite yet. 

Service revenue future

Thorsten spent quite a bit of time talking about the future of service revenues.  He wants the Street to understand that the decline will be slow.   The service revenue declined 3% this past quarter.  I think that decline should accelerate as people upgrade to BB10.  But at the same time there are thousands of enterprises upgrading to BES 10, and BlackBerry will generate revenue by managing other devices too, not just BlackBerry.  This will slow down the decline.

Let’s say it’s a wash.  Let’s say service revenue continues to decline at 3% per quarter. If that’s the case, I think earnings are going to rise tremendously.  Hardware gross margin increases will much more than offset service revenue losses. 

This was one of my major fears over the last year and, given the timing of things, I’m feeling much better about what’s happening now.

Of course, Thorsten also wants us to understand that they plan to invent plenty of new services.  He mentioned BBM services, cross platform integration, security, licensing and more. It sounds like all of this is early days, so don’t expect Wall Street to care about any of it quite yet.

Final thoughts

Every since taking over as CEO, people have asked if Thorsten is really in charge.  Jim Balsillie left the board, and now Mike Lazaridis is formally retiring his board seat.  There is no question Thorsten is running the company.  No question at all.

There is no question Thorsten is running the company. No question at all

And so far he’s kicking ass.  Sure, I think he could structure the conference calls better.  I wouldn’t start off talking about restructuring programs and cost structure.  I’d start with the juicy bits such as 55% of Z10 buyers are new to the BlackBerry customer family.  But I think the fact that he does start the calls talking about these more boring financial things is an indication of the kind of CEO he is.  He’s operationally focused.  And he’s brought this company back to profitability. 

With 100,000 apps, some incredible hardware and a very innovative user interface, I think it’s safe to say BlackBerry is officially back in the game.  No, they probably won’t be as profitable as they once were - at least not over the next couple of years.  But who knows what the future holds.  BlackBerry doesn’t see themselves as competing in the Smartphone market.  They are a mobile computing company.  And there is a lot more to come.  That’s what keeps it interesting.

Q4 was a win for Team BlackBerry and CrackBerry Nation.  Things are back on track.  Back in black.

Reader comments

Thorsten Heins brings BlackBerry back in black

181 Comments

Again, you clear up a lot of what is muddy waters for me. Thank you.

Posted via CB10

Good to see Blackberry is seemingly quite healthy, although I was conditioned to expect a bigger number of units sold with all the hype built up (namely ourselves & Thor's comment) stating this is a record breaking launch, sales have surpassed their OWN estimates etc etc.

Just shows, Blackberry had much lower goals set and even the "analysts" were more optimistic as they set a number and Blackberry pretty much just about reached it.

Hmm

Only 1 million BlackBerry Z10 smartphones sold during the last quarter is anemic considering their are approximately 15 million legacy BlackBerry users / subscribers in the markets where the initial launch was executed. And with a significant percentage of BlackBerry Z10 buyers coming from other mobile platforms the one million sell-throughs is not spectacular. BlackBerry needs at least 10 million BlackBerry Z10 and Q10 sales by year end.

Posted via CB10 from the BlackBerry Z10

10 million shouldn't be a problem. The Q10 has no significant competition. The Z10 could be sold cheaper and still be high margin. The GS4 just announced premium pricing ($250 with contract) and is still delayed making it slightly less of a threat for this coming quarter. iPhone 5S is still at least four months away. If you count all BB10 sales (because cheaper phones will work fine with BB10), I don't think there is any concern about selling 10 million by the end of the year.

This "quarter" of Z10 sales doesn't even include a full month in any market. It represents about 25 days in the longest markets and only about 2 weeks in the most recent released ones. So in other words, even if they keep selling at the same rate of 1 million a month with no growth accounted for with all the new markets it will be releasing in, they should easily hit 10 mill this year. Since it's obviously going to be in many more markets and have more word of mouth building throughout the year, I'm guessing at least 12-14 mill by year-end.

What spec would you improve? Assuming processor is already ample for smartphone functions, which I think is a safe assumption, the only thing that could be easily improved is the camera.

A larger screen. I want 4.5 like I current have and quad core to future proof the phone for 2 yrs. Essentially the aristo

Exactly what I am looking for! I've used the Z10, and it has no signs of lag as far as I am concerned. But like you said a Quad-Core future proofs the phone. Even though I believe that smartphone technology is going to level off in the next year or so.

But a Z10 is tempting

Quad core, but will QNX (and the BIOS the phone uses, or SOC) be able to turn off the other three cores when not in use? Think about the experience, we aren't in a spec race ya know.

I'm fine with diverse options for customers, but I wish this trend of premium = larger screen would stop. I think the screen size of the Z10 is a good compromise between real estate and one-handed operation.

Chris, I'm wondering about how BB is going to state subscriber numbers going forward. The impression I had was that they couldn't just lump in BB10 users with "old-school" BBOS users because there's no service revenue collected from them.

Is BB still going to state an active subscriber number? And if so, will they be stating the breakdown between BB10 and BBOS?

I hope the break down the BB10 vs BBOS numbers for us.  We shall see.  But to answer your question it sounds like BB10 customers count as subscribers even if they don't generate any service revenue.  So we should think of them as "users" rather than "subscribers", since they aren't necessarily subscribed to any BlackBerry revenue generating service, but they are subscribed to a BlackBerry ID / BBM / other services that BBRY is providing for free, so the company can call them subs if they wish.  

They made this pretty clear on the conf call, so I'm not just guessing (in case anyone thinks I am)

Great question Thunderbuck. I was confused by this too.

Chris, so does the 76 million number include BB10 users or only 'legacy' BBOS users on BIS/BES?

"...it sounds like BB10 customers count as subscribers....So we should think of them as "users" rather than "subscribers"..."

Yeah, that's real clear Chris!

I'm going to listen in to the call (I'm west coast, and on vacation to boot, so it was a little early for me). I'm actually hoping that they aren't lumping these users together; it's confusing. I'd like to see an "active users" number that combines the two, with a breakout for BBOS.

Chris, I went back and listened to the call, and just saw TH's interview on CNBC, and frankly I'm still confused. And concerned. If that net loss of 3mm subs INCLUDES the 1mm new BB10 users, then that means that there were 4mm BBOS subs lost? Really?

Is this sustainable? If you have any contacts in the company, it would be great to get some clarification on this. I'm not panicking, or planning to sell (if anything, the stable price right now is making me inclined to buy more), but I think we investors need a clearer breakdown on these numbers.

They only sold 666,000 to 750,000 Z10 devices sold, 1,000,000 shipped based on two thirds to three quarters sell through number. Of those devices sold (not shipped), 55% were coming from something other than BlackBerry, so they added 366,000 to 412,000 new people with the Z10. So that means they lost 3,366,000 to 3,412,000 BBOS users approximately based on the info provided. I'm sure they lost more BBOS users than that, but also added BBOS users in emerging markets too.

Yes, I have the same question. Are BB10 users considered to be subscribers? The US press is all over the decrease in subs. Let's clarify this! If they are not subscribers, the 76 million will continue to decrease as will service revenue...but there will be millions or BB10 users.

Thanks Chris, a clear honest and understandable commentary as usual. I think this report and the lead up to it has served to quiet many naysayers who have been spouting total crap regarding the future of BlackBerry and Thorsten. My conversations with friends and colleagues in the last bit have quietened considerably and hopefully the pleasant positive confirmation will shut most of the "analysts" up. I hope the market just lets BlackBerry have an honest chance, the rhetoric for the last months has begun to resemble a coordinated effort to try and ensure failure. I am not paranoid to that extent, but it has reached ridiculous levels. Anyone else get that vibe? Anyway Chris, thanks again for your sane insight

I just hate how they avoid every question and use the same answer for every question.

The amount of Z10 sold is one example...along with what percent of marketing makes up the SG&A and how the 50% increase to marketing will affect SG&A.

The analysts wanted financial information for the current quarter. That's what they were digging for in their questions. BlackBerry doesn't provide guidance anymore and weren't going to give any figures. While it sounded stilted and confusing, they were sticking to their no guidance philosophy.

"Thousands of enterprises upgrading to BES 10" Have we actually seen the company quantify the numbers of companies upgrading - the answer I saw from Thor seemed vague regarding this matter.

Its still a good quarter and the big guy knows there is lots of work to do. They have almost been guaranteed a running start with BB10 owing to pent up demand and expats wanting to come back. The numbers in Canada were tremendous - will be interesting to see the numbers from the USA at the end of this quarter. Hopefully the Q is available with enough time in the quarter to make a meaningful contribution I think the USA wants this phone.

I still wanna know why they have $2.9bn in the bank. what happened to that massive ad spending? surely if theyd spent some of that then the `lack of advertising in US stores` comments wouldn't be happening.

Thats exactly what I was thinking. Other than the forgettable Super Bowl ad, I don't recall seeing one Blackberry commercial. Put all that cash to use!

hey chris, thanks for the reply. I did note their comments on the increase, but last Q they said their cash position would drop by about $0.8bn due to inventory and launch advertising.
jus seems to me like someone kinda forgot the latter part of that tbh. I know they obv made cash from assets etc so otherwise they would of been around $2.6bn, but still, surely they should know they have to throw their money at this now not later?

I'm not sure if now is in fact the time. Do you want folks coming into the store to see one BB10 device or two? Probably only getting folks through the door once, so maybe better when you have two things to sell them.
And in the US BB ads are on heavy rotation on the NCAA basketball tournament, which is a highly rated series of shows with a great demographic for a gadget sale.

conversely, do you want to advertise your Z10 with or without major competition next to it on the shelves?

SGS4 pre orders are now open in some places, HTC One now on sale in some places. if you want to tell me either of those two things are a good thing then have at it.

I have a new theory. Please let me know what you think. Okay. Consider this: It's not about the Z10, it's about Blackberry 10, right? So if this is the case then I believe Blackberry wants a relatively quite US release. It is not the carrier who sets the specifics of how a brand markets itself, it is the brand. The brand is responsible for sending the carrier all the necessary specs (signage, location, accessories, booths, lingo, etc.) of the release. Knowing this, then we can safely say that Blackberry made a conscious decision to NOT pour a lot of money into this aspect of the AT&T release. This will have even more validity if the Verizon & T-Mobile release is handled the same way. Now, I say all of this to say this, Blackberry is aware of its weaknesses which is the key to being a strong competitor. It's main weaknesses being apps (Which in reality isn't a weakness, but relative to today's naive market it is.) and OS bugs (Which take time to surface & fix, especially with a 1st gen. OS). Americans are relentless when it comes to these 2 facets of the smartphone game. Blackberry doesn't want all those clueless consumers to have a chance to rip the device more than necessary.

So to prevent this unnecessary bleeding, release quietly and allow the best part of Blackberry, #TeamCrackberry (80 Million), to be the main marketing. Just yesterday I literally, after pretending to be a naive shopper for 15 mins., trained AT&T's on-staff Blackberry Z10 specialist on how to use the Z10 for an HOUR! She had just bought an iPhone5 & iPad THAT week! Yet her reactions were: "WOW!" "WHAT!?" "I DIDN'T KNOW THAT!?" "THAT'S COOL!" "IMPRESSIVE" "MAN, THIS IS BETTER THAN I THOUGHT." etc. We will be enough to carry Blackberry into the next phase, which I believe is where they are truly looking to focus their advertising efforts. The undercover device that will be released this Fall! You see, by then, there will be enough true buzz (Market Share) created from the Z10 & Q10 to have Americans truly paying attention to Blackberry 10.

I believe Blackberry has turned to the most tried & true method of marketing there is... WORD OF MOUTH. Once a person believes in something, they become the walking billboard. Don't believe me, look at Apple users. Another example: The same day I trained the AT&T Z10 specialist, before I was introduced to her, the employee who was with me at first was so unbelievably Samsung that after finding and showing me to the Z10 she IMMEDIATELY started bashing the Z10, admitting that she had NO KNOWLEDGE of the Z10, and PROMOTING the **** out of Samsung. Mind you, there was an iPhone right beside the Z10 so it wasn't an AT&T/iPhone thing (They're dropping the iPhone so what sense would that make?), it was about BELIEF. At the end of the day, the employees are carrying the devices they BELIEVE IN and this is what is going to come out of their mouths. Belief is what is going to ultimately bring Blackberry back to prominence.

I couldn't have said it better myself "winter_hat," "PATIENCE." #BB10believe

while any theorys could be right, BB stated they would blow $0.8bn on inventory and launch advertising. from the $0.3bn they say they increased their cash by, and their cash being the the same position as last Q, that means they spent less than half what they said they would.

normally being frugal is a good thing, advertising your platforms launch is kinda when you spend the $$ though, no matter what country your in

So without knowing all the facts, don't you think we should have some faith in BB's management that they know what they are doing? It is not as if a company that puts out a phone like the Z10 is run by idiots and morons. Chances are good that there is an internal strategy that we are not aware of and so with the very limited information we have, we have to trust these guys that they know what they are doing. I am sure all the things and scenarios being discussed in this thread are known to BB management. Likewise, I am sure they want BB and BB10 to succeed just as much as Crackberry nation does. I just can't help but think that there is more going on strategy wise than we know about.

the very simple fact is the $0.8bn spend hasn't happened.
faith or no faith you cant deny that.

strategy wise I cant see how waiting is a good thing with devices like the HTC one and SGS4 on the very near horizon, surely get the devices out the door now, not wait for you competition to steal your sales, either way though, as I simply stated, the spend they said would happen hasn't.

I think you've just nailed what I was thinking for a while now. People have bashed BlackBerry (and deservedly so in the past), but they are incredibly surprised when they see what the new platform can do.

I've shown a bunch of people some features of my phone. I encounter 3 types of people:

1. The haters remain quiet... instead of hate, their silence speaks volumes because they are inwardly impressed but have too much pride to admit it.
2. The followers, who know little about tech and just buy what their friends have are really impressed with the z10.
3. And then you have the flat out wannabes that just still jump on the BlackBerry Bash bandwagon that know jack about technology. They throw out blanket stupid comments and when you prove them wrong by demonstrating how powerful the z10 is, the conversation quickly neutralizes.

This is just the beginning. We haven't see the full power of QNX and it's evident BlackBerry employs some very creative people and engineers that now have a very power platform to build off of. We are going to see some exciting products from them in the future and until then... let's do our part to clear the hate, and show off how cool our shiny new toy is.

Some thoughts:
Why a touchscreen only device first?

Because BlackBerry knew they had a winner in their keyboard but thought their loyal base wouldn't give it a chance unless it was their only choice to upgrade to a "Modern" device.

Why delay the launch in USA?

Because they were banking on a successful launch in Canada and elsewhere to raise awareness and excitement in the US as the launches there take hold. Also, many of the bugs will have been worked out.

Why did they disappear from the market for so long when competition is so tough?

Because they needed the time to perfect their series of devices. Not just the z10 and q10, but the next ones as well. Also, and perhaps more importantly, the OS itself...
They knew the market is fickle and that all the hype about Samsung and Apple could be as short lived as they have been in the past. Their innovation now is incremental, not game changing, but BlackBerry's OS could be game changing in perhaps a more subtle, but equally important way. In short, they decided to be patient and do it right and critics bedamned.

That would take serious balls.

If I'm right about any or all of the above then BlackBerry Mgt isn't just cleverer than the analysts think it is (though they certainly are that) but on a path to wonderful things.

I sure hope so

Posted via CB10

scienceboy I think you are dead on. It took a lot of guts to bring the full screen device out first while guys like me really wanted the Q10 first. Blackberry had to gamble we'd be loyal enough to wait while they got a world class full screen out for the rest of the market - 55% of the buyers of which are surprisingly and fortunately coming from other platforms. I got a Z10 - be here any minute. Fortunately the family plan big enough we can add a Q10 when it gets here.

This is great news and we know they are on solid ground. Things should only get better from now.

Posted via CB10

See, I don't read it quite the same way. It shows stability, sure, and that's fantastic, but to me it means the jury is still out. We'll need at least another quarter (and probably two) before we see how sustainable BB really is.

Not meaning to sound negative. I'm a shareholder, and I'm thrilled at the profit number. It might be early to break out the champagne, is all.

Agreed. The most meaningful revelation will be the next reporting period, when questions about the US launch are answered.

I concur. I also believe the BB10 roll out is being played brilliantly.

Every quarter build anticipation for something new and then fulfill it. Last quarter the release of Z10. This quarter Z10 in the US and the Q10 outside the US. Following quarter US Q10 plus mid-tier device. Perhaps for the following holiday quarter a high end 'Aristo' or equivalent coupled with an entry level device. And so it goes. Build anticipation and then deliver on it. Quarter after quarter.

I never thought the first quarter and the next quarter will be good. It will take the z10 and BB10 a while to change the negative perception along with the time required for people to become eligible to upgrade or change devices.

Posted via CB10

I think we can break out the champage and celebrate today's results. Tomorrow, we can starting "worrying" about the next quarter or two.

I could be wrong, but doesn't 'subscriber ' mean someone who pays for the old BBM/BIS system? And coupled with the fact that 55% of new Z10 owners are NOT previous owners the math is a bit off.

If I'm right that means that they lost 3 million subs in 3 months, or 1 per month. But they gained 45% 'users ' in the last Mont of the quarter. Let's say that the number of Z10 sales is a lot closer to 1 million than 750K (which I think is reasonably acurrate), this means that roughly 400K new 'users' came to BlackBerry in the last month. If we can assume the same for the other two months of the quarter if the Z10 was released that would mean about 1.2 million new users.

So, 3 million subs were lost but 1.2 million new users gained (assuming a 3 month trend with the same numbers of the first month of Z10 sales) ... that makes the total loss of just under 2 million.

I could be completely wrong based on my interpretation of 'subscriber' but a loss of 1.8 million is HALF that if the suggested 3.75 million.

Posted via CB10

You're right on one of your two points.  

On your first point, you are wrong.  A subscriber does not necessarily mean someone paying for BIS / BES service.  It now means, as far as I can tell, anyone connected to BlackBerry infrastructure whether they pay or not.  Just like how Apple measures iCloud users.  

But I messed up the math when accounting for the 45% of Z10 customers who are not subscriber additions.  So out of the 750k they sold through (the number I referenced in my post), only 55% of those should be counted as sub ads, so here would be the corrected math.

BB10 sub adds gained - 750k

BB6/7 to BB10 migrations - 303k

Total subs lost - 3 million (given)

Total BB6/7 subs lost = 3 millon + 303k (this assumes, obviously, that nobody left BB10 yet) 

So, sounds like you're saying you can't own a BlackBerry phone unless you are a subscriber? I'm sure there are way more than 76 million active BlackBerry phones in circulation throughout the world.

Yes. BES10 can manage iOS devices. We haven't done it yet since we have another MDM for non-BES devices but we will be testing it. Incidentally, our upgrade to BES10 comes with a free Z10 so that should be on the way soon now that US carriers have started to open their doors. Sending a demo device along with the BES upgrade was a great move on the part of Blackberry. Exciting times for mobile device management - for all platforms.

Agreed. More people discuss whatsapp then blackberry. Get BBM and Blackberry in peoples faces every way you can. Seeing it on google play and itunes would be awesome. Tease them with video and voice only on blackberries or something.

Theres no way you can think of BBM as a selling point. I have 1 contact on my BBM list I speak too. 5 others I rarely talk too, Text would be enough for them. If it didn't exist I wouldn't even notice. And I'm Canadian btw, living in Vancouver. Nobodies thinking, oh I want a blackberry so I can have bbm with no contacts lol. With an uphill battle lets get the BBM subscriber base through the roof. Then go from there. BB10 has alot to offer.

Plus now that BBM and BB10 isnt useing BES. There should be no hurtle to do this. Before you needed a BB plan to get BBM. But now my Z10 is on a basic data plan shared by all smartphones.

Oh and don't forget things in the works and future things that this will open up for.

Bbm money transfers are jn beta. Online money transfers around the world generate billions in revenue. I see nothing but good things with this, paired with nfc payments. Lots of potential. EXCEPT useless with no contacts.

"They should have already done it by now."

I really don't think that would be a good idea. Perhaps in the longer term if the devices gain market traction.

Imagine how many of those Indonesian subs might up and move to a cheap Android phone if they thought they could communicate with their BBM friends. You only need wi-fi for BBM so there's no way of generating revenue unless they charge for the app.

Makes no sense to go cross platform with bbm. If people on other platforms don't accept it, it's a lost app for blackberry. They aren't going to generate revenue from other platforms unless they implement bbm money, which doesn't sound close to happening, if ever

Great article. I think it does a good job of highlighting what is going on with the company and explaining the earnings call.

I always figured BlackBerry would use the "Black in Black" song for their commercials. It would definitely stir the pot a bit. :)

Can you be "back in black" if you were never really in the red to begin with?... Either way, a great start to BlackBerry10

I've got a Z10 and using it with my old BIS plan. Do I count as two "Subscribers"?

Posted via CB10

This question is coming up often enough that I think BBRY should clarify how they measure things. Yesterday I went to my carrier store to get a new SIM for my Z10, because the Bell SIM I had with 60 days free service just expired. My old plan was a BIS plan. My new plan ... do they know that I'm not on BIS anymore? I have no clue. You'd think BB should be able to see that your BBID moved from a OS6/7 device to a BB10 device. At least that's the logical answer.

Since it was the carriers who motivated the move away from BIS to avoid paying the service fees I would think they know by your device IMEI once it's connected to your plan - no?

Chris U, even you are misinterpreting the "2/3 to 3/4 sell-though" comment. Read the Q&A carefully there... it clearly wasn't meant to apply just to Q4, but *to date*. I don't think you can assume sell-through was anywhere near that low for the 1M sold in Q4. Everyone is making that mistake so far... you can be the first to correct it. ;-)

Yeah, I think there was likely 95+% sell-through for most of February. Now, we're into March and launching in larger markets, so there'd be some channel filling.

I read through the transcript and from what I understood, the sell through was closer to 1M and not less than 750k in February. The 2/3-3/4 sell through comment was meant for february and March. Do we have any idea on how many Z10 phones they have shipped in total so far?

are we allowed to copy and paste part of the transcript here? I'm rereading that portion of the transcript right at this moment.

Because the 1,000,000 in that quarter relates to sold. There was some confusion on the call and Thorsten made it sound like that they sold 2/3 to 3/4 of the million which is wrong.

The 2/3 to 3/4 is to date.

Posted via CB10

I recall hearing that as well in the Q&A...
It makes more sense that sell-through was close to 100% as otherwise, why was there a need to ramp up? due to sell-out of inventory...
the 2 don't jive...I think turnover rate would be a better measure...like the velocity of money...

Excellent Article Chris! Sounds like we aren't out of the woods yet, but we're not down either.
I love the drama! :)

Justified in my belief in BB, I bought more stocks recently. We are going for a great ride and like Chris said, wait till the Q10 comes out. in a few weeks and there will be another jump

A good report and I expect things to be even better as the full assault unfolds through the year.

I am confused by the "Subscriber" drop though. Can we get a clear definition of who these people are? I thought it was going to be everyone that owned a BlackBerry? If that is the case I am surprised the new reporting method is showing that large a drop.

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Thank you for this article, gave me the assurance that i made the right choice of switching. I have high hopes for BlackBerry specially the Z10.

How can he possibly know that 55% are coming from other platforms if he doesn't know what the sell-through is?

Thanks for making things understandable for us. Glad to hear Blackberry is off to a good start in this marathon.

Great article Chris. My only caveat is this; "utterly basic logic" is useless to those who wish to construct a negative narrative for Blackberry. So it's moot to even suggest that these haters even care about the facts.

i'm wondering if most of the subscriber loss can be attributed to countries that had "delayed" launches, don't have the phone yet, and most important, to the dual persona of BB10. I used to carry 2 BBs, one work, one personal; but with BB Balance, I just need to carry one, which means only one registered BBID, and I shut down the other one. Movement like this would certainly impact the numbers.

I fairly certain BBRY can see whether your BBID is on BBOS or BB10, because when I was first setting up my Z10, my friend who works in BES department pulled up my ID and was helping me through some of the BBM migration issues, and he could tell if I was on my 9900 or Z10.

Great summary Chris.

The starting point for any comeback/turn around story is cleaning up the balance sheet and Heins has managed to do this in a very difficult period for Blackberry.

I sense they have some very good things brewing in waterloo and that they are financially healthy enough in th near term to see these through.

Launching the various handsets (especially the Q10) globally will settle the company into a period where they can focus on innovation and bringing mobile computing to the market in a variety of ways.

I really like the MDM move allowing android/iOS to be managed on BES 10....it keeps the cash flowing and i hope they assign the right resources to aggressively pursue this as i think it after the initial wave of handset sales from BB10 launches, this will be a major source of income for them.

Now if they could just shake the shorts off this stock so that it isn't so easily manipulated!!

Go BlackBerry

How does BlackBerry know what percentage of new subscribers are coming from other platforms? Do the carriers provide this information? Or does BlackBerry conduct a survey on all new subs?

Very happy for BlackBerry and for the industry as a whole. Special thx to Thor and his team of brilliant and bright lads. For the first time I feel Z10 is on equal footing with iphone. Great work

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I am one out of million. Nicely. Go Thor 2. Make sure watch Thor 2 movie in Fall. Bring them on.

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Reading this makes me very optimistic about Blackberry's future, not that I ever doubted them to begin with.

i missed the call, but it's such a turnaround for a company to at least make profits this early in the game, we can only see what's coming up next for them

This is just the beginning of this mobile computing device and the leadership of Mr. Heins over the next few years and more . Good bye laptops, hello BlackBerry 10. Just keep moving. Love my BlackBerry!!!

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GRRREAT article Chris,,, this is the kind of info i was hoping for,,, it's clear, understood by "joe blackberry", & to the point,,, glad to see this,,, good job...

Pity those bloggers who predicted doom and gloom for Blackberry and took up the short position.

Great article.

It looks now as though they're planning a steady release of devices throughout the year, I assume designed to generate rolling sales and flatten the peaks and troughs as new devices generate buzz.

This should lead up to a great holiday buying season when what appears to be the real flagship 10 product is released. I'm guessing the Z10 is really a mid-range product - but I notice they carefully avoided giving anything away.

Now if only they'd start to stop with the delays so more people can actually enjoy it. I mean, like here in The Netherlands. BB promised March 25 as the official release date (and 2 weeks before they even had a official demo store set up in Amsterdam). Then it got delayed to March 27. Okay, happens. But now they've delayed it to appr. March 30 and even that may change. So if they'd actually start selling then they would sell even more because it did get pre-order quite a lot here. As for myself, I didn't like BB at all until the Z10/OS 10 came around so I might actually end up buying it if they start to sell it without any more delays.

Chris I thought I heard during the call Thor say that they were getting service revenue off of every BB10 device sold, but that it was different from BBOS revenue (assuming the amount is less). Did I hear that wrong? The followup comments from Thor stating that they would continue to bring the BB10 users value by bringing new services via the NOC I thought cemented that BIS is still in play, and RIM is getting something from the carriers for each phone.

Heins Kicking ass? Whose? The shareholders and people who believed in him.... then yes. Except for fanboys with blinders and yours truly, nobody out there believes Heins.

Subscriber base loss quarter to quarter three-folded!!! That's a dramatic downtrend so how in the world can you project it flat for this quarter? Based on what? The wind, lingering winter?

This quarter included December/Christmas which is likely where the defections happened after people found out the devices would not launch last fall and stopped waiting. With the devices now available, they stand a better chance to retain users. Especially with the Z10 and Q10 in the marketplace.

Awesome.

Chris,

Why are you reporting based on General y accepted accident principles, I he thought ifrs is used since the last two quarters under the name RIM??

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Great breakdown Chris. Thank you. It was a better earnings call than I had imagined.

"Thor loves to put the hammer down"

Software Rim vs Apple.
I went to see the silde of Google maps. The Browse navigation.
I didn't like.
The difference between Apple and Z10 it is enormous .
Z10 feedback at shore Fnac:
When put my web page ... browser lost many time for open ! Not seconds...minutes.
When i open Google maps...and drive for one place the passage for a new maps is long waiting.

I went at apple and the device open quickly and in satélite vision . Wonderful slide.

My daugthter , one young 18 years old didn't like that .

So the Rim must be change that . Maybe the rim at countries , the responsables need put run well their devices.

If you go to one shop and see the diferences above it is hard to get the BB device.

Atention i love the RIM . I have one .

" Let’s say BlackBerry sold about 750,000 Z10s to end customers, but still lost 3 million subscribers. This means about 3.75 million people gave up their older BlackBerry devices, which have service revenue attached"

Nope. Firstly, 55% were not BB customers. So the number is closer to 340,000 upgraded from existing BB phones to BB10 phones.
Secondly, it means 3 million gave up their phones. 2.66 million leaving BB and 340,000 upgrading to BB10 devices.
This is assuming Z10 buyers do not count as customers by the old definition.

Thanks, Chris. I feel really good about staying long with BBRY after today. There was slight disappointment in not seeing amazing results and hearing about shorts getting squashed, but that was easily offset by the lack of any major loss on the share price. I was getting caught up in the lottery ticket mentality of BBRY stock even though I've been long for a while, which made all of those negative articles really p1ss me off. Now everything is calm, and the wild speculations -- both upside and downside -- are reigned in with a great snapshot of reality by solid numbers from BBRY.

I'm excited about the coming year and solid quarterly advances in revenue and subscribers. Thor is really coming across as a CEO that is making a difference. I hope that's true, and I hope that BB employees have that same impression because the loyalty that it creates will really drive the company.

A great day for BB.

Are any of you Blackberry shareholders? and I mean direct shareholders actually owning the stock - not through some fund. And no, owning a blackberry is not considered as a shareholder, I know most of you are blackberry users (or subscribers, whatever you want to call it) including myself.

You guys analyzing and questioning the result as if you get paid to do so.

WE WANT A QUAD CORE Z10 MAKE IT HAPPEN Thorsten Heins !!!! and make those custom colors available keep the apps coming and nothing else out there will matter!!

How would you think about units for Q1 given the CFO indicated on the call that the channel inventory is "leveling off". Presumably its close to zero since they've drained 12mm units over the last 5Q's. Given the sell-thru was 7.9mm units and maybe 700-750k were bb10 units, there were still ~7.2mm older units sold. If channel inventory has leveled off, could we see a quarter with 6-7mm older units plus 3-4mm bb10 units? i.e. 9-10mm overall units vs. the 6mm we saw this Q?

I am impressed with 100,000 apps, but I think BlackBerry should start being more picky about the apps. Last night there must have been 100+ apps submitted that were "city guides" likely just a copy and paste of a WikiPedia page.

IMHO these apps that no one downloads or wants should be put into an archive category. I would much rather find fewer apps but better ones.

If BlackBerry isn't careful it will have something that resembles Google's marketplace, which has some great apps, but you have to sort through tons of crap first.

Consumers know which ones they want, obvious apps will not be downloaded or rated accordingly. BlackBerry World is not going to end up like google's Play store.

I'm excited for our future on BlackBerry and I'm more than happy about the shares I hold. -typing from my new white Z10-

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Im sorry but im just not as optimistic as everyone else. Im more a pessimistic BB user.
Yeah well done Thor for maintaining cash reserves and making a profit, however this has been done by cutting costs in the business and raw materials in the product. Yeah great but the rest of the world is doing this, its called austerity. And like all these other countries the question that needs asking is, where is the growth coming from? Losing 3m subs isnt good news. You can continue cutting operational costs but at some point the cash reserves will dwindle.
is 10m BB10 sold by the year end a real possibility? I dont think so if the price point isn't right. Only die hard BB fans want a physical keyboard. The Z10 is to expensive in emerging markets and when a mid range one with a decent price does come out in 6 months time, BB will miss out to Android and WP with Nokia phones. Sure the sell through percentage should be as close to 100% as posible otherwise you have money tied up in stock in a warehouse somewhere. 66-75% isn't very good.
this year is critical, more subscriber losses will mean more cost cutting measures and potential dipping into the cash reserves

Nokia isn't competiting because the Microsoft platform has caught on after 4 phones and almost a year in a half and didn't take BlackBerry's spot. You have a point with Android, BUT if BB10 does (as you said) have a cheap phone w/ querty and touch keyboards will make us CONTINUE to stay competitive. In the emerging markets, THEY spend a lot on phones because they don't have the networks that we have in North America. Your pessimism is correct to have. Nobody can see the vision without execution. We all don't want to see another PlayBook ordeal.

100% sell though means none of the carrier stores would have any blackberry z10's to sell. Oh and nice one gellar.

Chris first of all great article. It simplified the way i get to understand the stock market. I bought a few shares last week for 2 reasons, 1 i really believe in BB10 and its success. 2nd i just purely and heartly love the Brand even though im probably the one sporting a Z10 on the island. Yet what confuses me and maybe some one could help out is why the stock closed at -0.84% and ot started with a strong +6% the call was of higher expectations if i read correctly right?

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Exceptional write up and synopsis of the earnings report, Chris.

"Now I’m going to do my best to share my thoughts without writing a novel. Because believe me ... I could."

I would've eagerly read that novel.

I might have missed it but, were any of the 1 million BB10 units that were to be sold to the un announced customer, sold during the quarter?

People are are excited at the modest profit the company generated last quarter, but that is mostly due to cost cutting. Do you know which companies go through this sort of brutal cost cutting? Companies that are in decline not in a growth mode. Look at the spend growth at growing companies such as Amazon, Facebook, Apple and Netflix.

The loss of the subscriber base is significant. 3 million is a lot and it will not be easy to recover. I bet you will see further decline next quarter. simply, the uptake of the z10 and the a10 will not compensate for the people leaving the platform. This will specially hit hard in emerging markets which has been the biggest growth markets in the last few years. New Chinese android devices undercutting BBRY devices by significant margins and loaded with BBM competing software such as whatapp, Line, Skype, and loads of others, will see the bbry share of the market decline significantly.

People are feeling good about the cash in the bank, but don't forget that companies don't always pay immediately for the goods and services they buy. They have credit terms of 60 and 90 days. So as these payments come due, you will see the cash balances decline. Especially as we see the annuity from the service plans decline.

I really hope the z10 and q10 do well, but you need more than just a good hardware and a new Os. I don't know why people as so happy that there are 100,000 apps. They are mostly junk. I would much rather have 100 top quality apps than a million crappy ones. They company must work hard to fix the bugs in the Os immediately. They must work hard to bring world class apps rather than ported android apps. If I wanted that I will get an android phone.

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Bugs get fixed with software updates. Apps? It all depends on the developers and they choose if they don't want to make an application for a specific platform. Ported applications? Give the developers a break! They want to see if they'll get enough downloads and reviews before even putting the effort into a native app. Give them some appreciation.

I really hope that It won't take too long for BlackBerry to starts recovering it's subscription base growth

Hi,

I think the Z10 is going to start generating some good buzz. three of the those dragons den folks dumped their iphones yesterday for Z10's If you have a moment have a listen to Kevin O'leary tooting his horn about the new z10.. Its quite interesting and very positive...

fast forward to:
07:45

tinyurl.com/cql43g5

Yes. BlackBerry is back in black. The great news came out after almost all analysts were expecting loss. The great news is out when the S&P is up 0.41%. The great news is out when the technology is up 0.26%. And the Blackberry stock? Down 0.84%.

Almost no negative news around at the time of earnings. All paid bashers were surprisingly silent; some of them referred even positive about Blackberry earnings - allthingsd.com/20130328/blackberry-posts-surprise-quarterly-profit-sells-1-million-z10s/. Why the hell the stock didn't go up?

The answer may be shorts. Blackberry is heavily shorted stock. More then 155 mil BBRY shares were shorted at the time of earnings. It's more than 30 % of all BBRY shares!

Even I don't have relevant options software (can't afford it) I think there could be found some correlation between the most popular strike prices and BBRY earnings stock price.

I think SEC or other responsible agency should look into it. I'm starting to be disgusted of the Wall Street. Because it seems to me that any stock price can be driven by few hedge funds (with paid press behind) regardless of real performance of the company.

Chris, where does the "Fact" of a 55% switch over come from? How does this get calculated? Are carriers reporting the switch?

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Just my experience with the stock market, news can only do so much. We're all just small players just trying to catch the waves that the big players cause with their movements. As many have said, there is a severely unbalanced ratio of shorts right now and I'm sure some of them are big fish trying to cause the waves to go in their favor.

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Two things: 1. I had the old 9700 then got the Z10. Does that mean I'm no longer a subscriber?
2. I agree with that the number of total apps is not as important as the number of good apps ... I only want one flashlight app. ya know!!

Yeah.. right! All i see in my brokerage account with BBRY stock is red, red and more red. Stock is below the level when Heins took charge... just sayin