What we learned from John Chen’s first quarterly conference call

By Chris Umiastowski on 20 Dec 2013 01:13 pm EST

Today we had our first taste of a BlackBerry quarterly conference call under the leadership of John Chen. We like this guy. He didn’t come armed with a script of prepared remarks to read at us like most CEOs. Instead, he just talked, unscripted, about what’s happening in the business. 

Chen has only been on the job for 45 days, but it’s obvious he’s not just sitting around thinking about what needs to happen. He’s out there doing it. From redesigning the executive team to signing a company-changing deal with Foxconn, this CEO is a man of action and he may just be able to pull off what seems like an impossible task. He might actually bring BlackBerry back to consistent profitability. But … don’t count on it happening anytime until fiscal 2016, which for BlackBerry, begins in March 2015. Between now and then it is quite likely this company will continue to burn some cash and lose some more subscribers.

Let’s take a very quick look at the quarterly numbers so we can then move onto the more interesting stuff.

BlackBerry generated only $1.2 billion in revenue this quarter, down from $1.6 billion last quarter. The single largest source of the decline came from the hardware business. They recognized revenue for only 1.9 million handheld devices compared to 3.7 million last quarter.

Chen has only been on the job for 45 days, but it’s obvious he’s not just sitting around thinking about what needs to happen

I won’t get into a detailed explanation of this here, but there is a difference between what BlackBerry counts as revenue versus what sells through to end customers. They’re in a funny period where devices previously sold into the channel and previously recognized as revenue are now flowing through to end customers. At the same time, new devices shipped into the channel aren’t being counted as revenue until they sell to an end customer. So revenue is a bit understated. It’s more important to look at sell through numbers rather than revenue recognition. 

A total of 4.3 million devices moved into customers’ hands this past quarter, a lot more than the 1.9 million the recognized revenue on. This compares to 5.9 million units shipped to customers in the August quarter with revenue recognized on 3.7 million. 

Any way you slice the numbers, sales of BlackBerry devices are declining and BB10 sales are not very strong. In fact, out of the 4.3 million shipments to customers this past quarter only 1.1 million were powered by BB10. The remaining 3.2 million run the legacy BB7 operating system.

Of course this is helping BlackBerry slow its decline on service revenue. Most of the service revenue comes in the form of SAFs (system access fees) paid by carriers to BlackBerry for each device on the network. More BB7 sales means more service revenue.

And this brings us to a discussion of the future of BlackBerry 10. Plenty of analysts and industry pundits have been calling for BlackBerry to exit the hardware market. Others with unrealistic expectations have been suggesting BlackBerry should sell the hardware business. I have no idea who these people think will actually pay for it. I’ve always stuck to my view that the hardware business is worth nothing to anyone else.  We saw other analysts calculating how much it would cost for BlackBerry to shut down its hardware operation. Most of the costs would come from purchase obligations the company had with its suppliers. 

Well guess what?  Today BlackBerry did shut down its hardware business (sort of).  Except they’re still going to sell hardware.  Sound crazy?  Here’s the explanation.

Today BlackBerry did shut down its hardware business (sort of). Except they’re still going to sell hardware

When BlackBerry was at the top of its game it used to do business with almost every major contract manufacturer out there. Then, as part of the “CORE” restructuring program last summer Thorsten Heins consolidated BlackBerry down to 3 external manufacturing sites. None of those involved the world’s biggest contract manufacturer, Foxconn, who also happens to make iPhones for Apple.

Today, BlackBerry announced a massive shift in its device strategy. Foxconn is their new manufacturing partner, and it sounds like they’ll be dropping their relationships with all other contract manufacturers. In my mind this amounts to nothing less than a shut down of their prior hardware business alongside the startup of a new, much leaner hardware business via Foxconn. John Chen made it pretty clear that he hopes Foxconn will take on all aspects of hardware design while BlackBerry’s designers contribute industrial design and its software engineers continue to build the OS.

Simply put - in 45 days John Chen has gotten some major negotiation work done such that BlackBerry can get much leaner and faster in how it brings hardware to market, while still keeping all of the benefits of running its own highly secure and reliable operating system.

For all the talk about low end devices (i.e. “Jakarta”, a 3G device destined for the Indonesian market), there is absolutely no reason BlackBerry can’t use this same model to produce high end products for the enterprise market. I was pleased to hear Chen actually say they were exclusively focused on the enterprise market when it comes to high end devices in the near term.

This flies in the face of what I consider to be a an idiotic aspect of the open letter written by analyst Brian Blair recently. I don’t think the whole letter was idiotic. In fact I agree with much of what he wrote. But he suggested BlackBerry should completely exit the high end market. This makes no sense whatsoever. It’s pretty obvious they have a bunch of good enterprise customers who have decided to use BlackBerry 10. To do anything other than continue to make great hardware for enterprise customers AND price it at an appropriate premium would be stupid. In  fact I think BlackBerry should consider making low-end devices that are not BES compatible at all. This would ensure enterprise hardware sales have great margin, while still offering low margin hardware to the emerging markets.

In fact I think BlackBerry should consider making low-end devices that are not BES compatible at all

Here’s one more little nugget I wanted to discuss:  Intangible asset purchases have been making it impossible for BlackBerry to profit in hardware. In plain english, on every quarterly cash flow statement you can see BlackBerry spending hundreds of millions of dollars for licenses related to handsets. They’re massively over paying because these deals were struck when volumes were higher. They were spending over $500 million per quarter for the last two quarters. This translates into over $2 billion per year. That’s a LOT of cash. Guess what?  It sounds like they renegotiated these deals in the November quarter. These license purchases amounted to only $234 million. They’ve got another $500 million to spend over the next year, which is far lower than previous spending. After these commitments are done, cash use should drop further. This is an important cash savings, which further convinces me the company has a strong enough balance sheet to make a go of its turnaround.

Let’s wrap this up by talking about enterprise services. I love how Chen so clearly articulated his focus on the low hanging fruit. The most logical BlackBerry customers are those in regulated markets. Talk about something Wall Street understands!  Chen said he’s building a team of sales people to focus entirely on regulated markets, which obviously includes verticals such s finance, legal, medical and government. 

It looks to me like Chen is implementing Pareto’s principle. He has walked in and immediately figured out who are the 20% of enterprise customers that could realize 80% of the value of what BlackBerry brings. He’s focused on building devices and solutions and a sales team to go hardcore after these customers first. Only then will he expand beyond them.

The bottom line: the quarterly results were about as ugly as people thought, but the strategic plan Chen is implementing is hard to argue with

The bottom line: the quarterly results were about as ugly as people thought, but the strategic plan Chen is implementing is hard to argue with. It makes sense, and he’s clearly a man of action, which is good. Will it be enough?  I don’t know. It’s going to take them the better part of the next year to turn things around and stop the business from shrinking. But I think they’ve got a strong enough balance sheet to do it.

As for the stock … I don’t know. We’re not going to see any inspiring numbers for a while, but then again expectations for this company are practically zero right now. Betting on the stock is a bet on the company’s ability to stem the losses on hardware while building up new revenue in the enterprise business. If you’re convinced they can succeed, you should probably buy the stock (and you get any potential BBM upside for free at this point). Otherwise stay away. And no matter what … take responsibility for your own decisions. If you’re going to complain and blame someone else for an investment loss then you are not enough of a grown up to own stocks.

Reader comments

What we learned from John Chen’s first quarterly conference call


Honestly I cant really blame heins, he started out with the company losing subscribers and he brought bb10. Sure, he may have had bad marketing, but he brought BlackBerry to another step to the future

True, but keeping all the miserable managers like the french one was a big mistake! And the price politic is also his fault..
John is now trying to change it, with the 5yr contract with Foxconn..

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Chen might want this job longer than 5 years,funny the contract with foxconn is the same as his contract,when it is up ,who better to keep it going?might have BB by the boys, then.You thought Thor's contract was bad.Chen's next one will see him and Prem owing+50% of the company.

If Mr. Chen successfully revives BlackBerry he deserves 50% ownership. As for Prem Watsa, he can rot in Hell for the shenanigans orchestrated by the former chief executive officer, himself, and the malfeasant board of directors.

Chen has a nice stock based compensation package. Deliver a higher stock price and he gets paid very well. He's been pretty effective so far, thank god. He's doing exactly what I would do and doing it way better and faster than I would be able to do it.

At least the strategy which Chen is guiding seems to be positive in message and deed. The next six months will be very interesting for every BlackBerry user. As a signal of my continued support of BlackBerry I bought a BlackBerry Q5 today rather than waiting for an anticipated price reduction sometime during Spring 2014. As I said in another posting if John Chen successfully revives BlackBerry he deserves to be rewarded handsomely.

They will be there in 15+ years and climbing bringing the mobile industry best security in existence.

Can you beat this by four years 59 minutes and 30 seconds please?

Smell ya later negative Nancy.

BlackBerry forever, haters never!

The pundits said that five years ago. They'll be right eventually because every company fades away at some point in its lifetime. In the meantime BlackBerry is not dead.

Chen clearly stated that this was already in place... all he really had to do was sign the paper. BlackBerry was working on this deal with Foxconn pre Chen...
Listen to the call.

That’s hard to say… but in any case I think BB could repeat the deal with our with our Prem/Chen. The precedence has been set now. Foxconn will also want the contract as the make profits.

Heins actually gutted the leadership team pretty substantially. A lot of the legacy culprits under Mike and Jim were tossed under Heins - the CTO, the CLO, the COO, the CIO , the head of software etc.

That's how it actually went. Heins did a lot to change the people and culture at BlackBerry. He breathed life into the company, managed the finances well, made major cuts and still was able to bring BB10 to market with positive press and support by most tech bloggers who generally were impressed with the product.
Unfortunately, the strategic side of things, I think, was perhaps beyond his ability to anticipate and get in front of market perceptions. He always seemed to be reacting to events rather than shaping them. Tough for anybody in that situation.

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I agree with what you said. Heins did some good things but bringing on Frank as CMO just ruined BlackBerry s chances with it s marketing

Negotiations with Foxconn didn't just start in the last 45 days. TH must have been involved in the early stages.

During the Call Chen said that the deal was already in the works. All he had to do was finish it.

He said, it was something he really liked when he arrived saw it, and he wanted to give credit where it was due. Aka to TH

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This will probably come across as radical, but I don't think BB should have done much marketing. Imagine if they had blown out and spent millions of dollars on marketing? Would BB be any better off? Many reviews and early adopters bemoaned the "lack" of features, and those were the techies. Imagine what had would happened had the average Joe bought a BB10 phone. I bet there would have been a lot more unhappy people who wouldn't have come back. Now we at least have a chance to win people back because so little have actually purchased or looked at BB phones. The road to winning people is much easier when you don't have to convince them to try you again, now they can come at it with a fresh look. Note: I think BB10 is a great platform, I just don't think it's quite ready for the average user.

I do think mistakes were made, but I'm not entirely convinced marketing was one of the biggest. Chief among the mistakes was way over estimating demand for BB10 phones. I think the team expected everyone who had a older phones to change over wholesale, obviously that didn't happen.

Once the software is fleshed out a bit more, and they have a better story as to why you should switch, they can start the marketing blitz.

The average Joe NOT likes BB10 because he dont know all gestures even After 8weeks. I personally know 3 People with Z10,they all NOT like BB10. I know why: too complicated.

Nice dig at the complainers, Chris. People need to make dispassionate investment decisions.

I've been concerned about what would become of the high end BlackBerry phones... let's hope we hear some solid rumors of a new flagship phone in the new year.

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How many "flagship" smartphones can a company release in only one year? BlackBerry needs to settle down and stop releasing yet another short-lived flagship device. First it was the Z10. Second it was the Q10. Third it was the Z30. Enough already.

If BlackBerry will make high-end phones only for enterprise (and focus is regulated ones), it may mean only QWERTY high-end phones in the future. Touch screen phones or whatever is trending in the mass market will be made by Foxconn for the low-end tier. Hope I'm wrong as Z30 is very promising.

I love the last sentence ... "And no matter what … take responsibility for your own decisions. If you’re going to complain and blame someone else for an investment loss then you are not enough of a grown up to own stocks."

Chris, what do you think is the bet of the market about the value of Blackberry right now? I mean it seems that until now the bet was if BB goes bankrupt or not, now bankruptcy is almost totally faded away and the bet seems to be on the timeframe between burning cash and return to profitability and the size of BB at that point, and by size I mean an overall of everything hardware, services, software and I like to put BBM apart because I thing it has its own variables.

I see no drama happening now, if they keep on track and get on an upward movement - stock and sales / revenue, I am sure, more cash will be made available, even if they burn through the current pile.

I am sure, Prem is happy to pay a premium, hahaha...

My name is Prem, I'm using BBM ... from my QuZe10 ...whatarhyme...

well as of 1:30pm, shares of BBRY are trading at 7:18 per share, for a gain of 92 cents on the day. Hopefully we don't see a whole lot of short sellers over the next day or so.

Don't worry, all the peeps who shorted the stocks will be calling their media partners on Monday to spin some bad stories. True or not.


Thorsten Heins and the BlackBerry board started the Foxconn deal - and probably quite a while ago if they're ready to release phones by April. Mr Chen made reference to this in the call.

Having said that I agree entire with your impression of John Chen. It's not just that he's a dynamic individual, he actually knows about his subject.

As for getting rid of hardware, I still find it hard to believe analysts are so ignorant as not to realize that without hardware BlackBerrys much vaunted security wouldn't exist. It's precisely because BlackBerry is able to bake in identity certificates into their devices that the security exists at all.

Without that handset security BlackBerry has no real competitive advantage over other MDM suppliers. But with security BlackBerry is far and away the best combination of MDM and device. Only someone who has never tried to implement other MDM in a secure way would argue otherwise.

If and when the market starts to get this difference I believe BlackBerrys fortunes will change.

Aren't you the same person who blindly defended Thorsten Heins back in August by spreading misinformation like "He was an extremely bright guy with PhD in physics" or some such? I have nothing personal against you but it is detrimental to spread incorrect information, and your argument loses the credibility. Heins was no PhD, although he does have an MS from a German school (I forget what discipline it was). I have no information if he was as bright as you tried to portray him, but in my personal opinion, I rather forget about his. I highly doubt that Heins started any serious discussion with Foxcon, as you presented no proof. I only see the results today, not in the past, and the new management team under John Chen appears to be far competent, knowelgeable, experienced and strategic. I place far more hope in the new management than the Heins & Company.

I take it you didn't listen to the earnings call this morning. In which John Chen admitted he couldn't take full credit for the Foxconn deal.

It takes at least a year to take a phone from conception to manufacture and John Chen already had one in his hand on the call.

Now I hold Mr Chen in high regard. He seems the right man to fix BlackBerry. But even Mr Chen would have a tough time getting Foxconn to go from concept to manufacture in 45 days.

As it happens Mr Heins was a very effective operational CEO. So effective Prem Watsa wanted him to stay on and have John Chen act as Chairman. It was Heins choice to leave as Prem Watsa made clear recently.

What Heins couldn't do was manage PR and the media, nor could he open up the Chinese market. Mr Chen seems far more accomplished in that regard. (He took Sybase to be a big player in China - not many people seem to be aware of that).

I'm not arguing Mr Chen isn't the best choice for BlackBerry, but in 45 days all he's doing is continuing where Heins left off. I expect him to make great improvements in marketing and especially in opening up new markets in the days ahead.

I would think that John Chen has been talking to many people, including Foxcon, way before he was formally appointed the CEO. It's not like he became the CEO and suddenly started arm twisting capable people to work for him either.

He would have had to have been talking to Foxconn when he was with SAP to make this happen.

To announce a deal of this nature, for Foxconn to have committed to a plant in Indonesia and for pilot phones to have been manufactured will have taken months. Not to mention how long it would take to set up the information systems necessary to manage this type of integrated contract manufacture.

Believe what you want, but I can assure you this deal will have been underway for quite a while before John Chen arrived. He just happens to be the man that can make it happen. IMHO this deal will ultimately make BlackBerry a market leader again - but I'm biased.

OK, you can speculate whatever you want, but please do not spread false information as if it were a fact. There has been no indication of who was doing what, including your seemingly definite claim that Heins started the discussion with Foxcon.
I am equally speculating in response to your misinformation, but I am not presenting them as the facts, but just my personal speculations, although I was trying to be logical and reasonable in making these speculation. But this type of speculation is a waste of everybody's time. I was just trying to stop "misinformation".

I'm not speculating.

I'm telling you what John Chen told those of us on the call this morning.

And the logic is clear enough. In 45 days Mr Chen could never have got this deal to where it is. I'm not saying he may not have been a critical factor in it being completed - I'm sure he was. He was in China less than two weeks after he took the job.

But the deal was started in the Heins era - and Mr Chen himself told us that - no need to speculate.

Let's stop forming your own opinion, presenting it as a fact, and wasting people's time along the way.
Please let me respectfully exit from this debate :-).

Oh, BTW, Heins was no way hell a PhD in physics either.

Oh, before I exit, I would say that the previous Board may have a chat with Foxconn and others relative to the possible consolidation of manufacturing bases, which was so apparently needed, but to say that Heins was behind it (or leading it) was a speculation with no proof.
The type of the Foxcon contract reported this morning has a Chen signature all over it, so appears to me at least. It was indeed a "strategic" move, probably as a fruit of Chen and his recently appointed lieutenants.

Br is right with this: Chen said he didn't have a lot of influence on the Foxconn deal. It's in the earnings call and you can listen to it yourself.

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Chen stated during the earnings call that he couldn't take all the credit for the Foxconn deal, that prior management started the deal and he came in and made sure it went through.

Posted from my Red Zed

Does that bother you?
My brain tells me not to respond, but I do anyway.
I just do not want anybody trying to "blindly" give every credit to Heins when it's not proven, particularly from a poster, who told us that Heins was a PhD in physics (totally false) as if we had to praise him.
The poster was not supposed to say as if the Foxconn deal was done by Heins, that's all. There is no other point. No big deal. Deal with it :-).
Yes, I am not a great admirer of Heins. I remember him as someone who brought down BBRY to the blink of bankruptcy. We'll see.

So far as Foxconn is concerned it IS proven. Proven by John Chen. So we're not speculating.

Heins did not bring BlackBerry to bankruptcy. That was Jim Balsillie. Heins protected cash flow, reduced costs, slashed headcount, and delivered 5 phones in a year.

He wasn't the right man to take BlackBerry forward because he was not able to choose the right people to market BlackBerry 10. But to suggest he took the company to bankruptcy is totally unjust and the complete reverse of the truth.

Without Heins the company would have gone bankrupt. The strategies he put in place from an operational perspective are the same John Chen is moving forward. What Chen can bring is the ability to move into other markets and enable more agility in responding to market pressures.

Chen said he's held a Jakarta in his hand running bb10.

Is it possible Foxconn could do that in under 45 days or does that indicate TH was already working on an agreement with them?

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Chen holding a "Jakarta" in his hand has no significance at this time. If anything, it may have been the fruit of his efforts. It's very likely a prototype anyway (although it is an indication how fast things may have been moving). Foxcon contract appears to have included something more than the manufacturing contract, and it would be very prudent to think that this type of contract would never be materialized in 45 days. Foxcon is not stupid. I would think they would have never agreed with anything with Heins but was probably very comfortable in talking with, and even have a strong confidence in Chen. They probably agreed with this type of "strategic" agreement only because it was Chen with his excellent track record behind him. You have stopped hearing from Heins way back around May (?) this year, and I am sure it was because of his constant missteps, gaffes and blunders, and the board decided to silence him. He probably was on the chopping block at that time, and the Board was talking to many people, including Chen way back then, or even almost a year ago when they felt that the BB10 was a flop. Even then, Heins was still talking "strategic move", "mobile computing" and all those gibberish.
Sorry, I am not hiding my strong discontent with Heins. He may be a nice person,and even have been a good subordinate to his superior, but eventually proven himself totally incapable of any strategic planning or management leadership.
As I said, I rather wish to forget him, and watch how and where John Chen will take the new BBRY to.

Again I repeat. John Chen himself told us the Foxconn deal was started by previous management.

Prem Watsa, the majority shareholder is on record as saying he wanted Heins to stay with John Chen being Executive Chairman. Heins evidently didn't want that arrangement so decided to leave.

I'm not saying Heins was perfect. Far from it. He was really more operationally competent than as CEO. But you can bet your life BlackBerry wouldn't exist today if Heins hadn't taken some very very difficult decisions. Including laying off thousands of employees. And BlackBerry became far more open under Heins. Especially for developers. Development support improved dramatically under Heins.

And strategically BlackBerry is better placed now than under Balsillie. Costs had spiraled out of control under Balsillie.

Heins messed up with his choice of CMO but otherwise he did a reasonable job of delivering. Don't forget we got five phones this year - something of a record. The strategic mistakes were made earlier when BB7 was abandoned in favour of the unproven BB10. And they completely underestimated Apples stranglehold on US carriers, and Samsungs ability to undercut everyone.

Having said that I'd agree with you that John Chen is far better placed to complete the turnaround.

Thanks for stating the simple truth. Far too many people dissing Thor simply because they can. He
inherented a company that was grossly mismanaged and brought products to market that were competitive and state of the art. Chen can market and that is what BlackBerry needs at the moment.

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The code name Jakarta for BB has been around for some time. Definitely before the 9720 was still born (released).

Good article,only the last part bugged me a little,..Expectations of the company are what drove the stock up today,this is literally a new beginning.

They need to talk with the Carriers. I can't say how many time I've been in a Rogers or Bell store where the employees are just bashing BlackBerry but when asked they have never used them!

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All about carrier profit margins. They don't make enough from BlackBerry.

So carrier employees are push to sell iPhones - so Apples sales targets can be met.

When BlackBerry starts selling Foxconn devices price competitively with Samsung the carriers will switch.

At which point the biggest loser may be Apple.

"They already are priced competitively". That's the price you pay. What is the carrier paying?

You can bet Samsung devices are cheaper to the carriers.

If BlackBerrys were cheaper the stores would be full of BlackBerry devices. They're not.

Consumer demand drives the sales of iPhones. Apples marketing has been effective enough to persuade people to pay Apple prices. And because of the demand Apple has minimum sales contracts with carriers. i.e. the carrier has no choice but to push iPhones.

But for Androids the consumer demand is less obvious. I don't think people buy LG or HTC to look cool. Carriers pay less for the devices and therefore push the devices. Especially Samsung (since Samsung is even cheaper than the rest).

But the combination of current cost reduction programs combined with cheaper manufacturing from Foxconn should see BlackBerry prices to the carrier become competitive. At which point no doubt AT&T and Verizon will suddenly be interested in selling BlackBerry again. And once BlackBerry starts selling in volume, they become cool again, at which point become a threat to Apple also.

This explains the somewhat contradictory strategy of Mr Chen, who on the one hand claims to be focusing on enterprise (who can afford to pay more) but has just negotiated a deal to build cheap phones with Foxconn (clearly for consumers).

Android has a bigger market share than iPhone so that is your first mistake so consumer demand is larger.

For the carriers to even WANT to sell BB, BB would have to do something to drive that demand up. EIther giving away the devices to the carriers (which would lead to a larger loss on the balance sheet) or have another huge selling point.

At this point they have none. The software is dated, apps are non existent (unless they are leeching off Android, and why not just buy an Android) and there is no "Cool" factor.

They are going under, Samsung/MS or some other large OEM will buy them within the next few years only because of the government contracts and BES.

Android has a larger market share because the carriers push the devices.

They push the devices because until recently Samsung was dumping product. (Which is why until recently, despite having vast market share Samsung made very little profit on smartphones). Also why HTC and other Android manufacturers are having similar problems to BlackBerry. The price you pay has nothing to do with price Verizon charge.

All BlackBerry have to do is reduce their price to the carriers and all of a sudden you'd see BlackBerry pushed.

In the end carriers want to make money. They couldn't care less what phones they sell.

You clearly haven't used the new Z30 (not likely to because the carriers don't want you comparing it to the crap they're selling you), which explains the nonsense you're saying about BlackBerry software.

I've recently evaluated a number of Android and iOS devices and BlackBerry 10.2.1 is vastly superior to both.

They're going nowhere. As the only really secure smartphone option, anyone that needs security (and that's most large enterprise and government) will end up using BlackBerry.

BlackBerry won't be sold to anyone. Because BlackBerry has the crown jewels of security. Patents on ECC. If the company came close to going under their survival would become a matter of national security in Canada and the USA.

It's hard to believe after another staggering loss that the share price is rising. The only reason I can put forth is that the markets are beginning to see the potential of BES10 and BB10. Have the z30 and it is awesome.

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Have you seen the stock price. Up 15 percent. Wow. Some people must like what they heaard.

Posted via my awesome Q10

You mean short covering... you really have no clue about accounting, financials, economics and even less about stock markets...

Why don't you just hold it...

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Hihi.. so that's what you're doing on Fridays? :-D
U sux my friend and I'm doing your mum... she sux too... in bed

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BlackBerry needs a deal Witherspoon Google... must pay some money to google develops theirs apps

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I'm confused, doesn't BB already have high-end devices for the enterprise market? Aren't these the Q10/Z10/Z30? Or since they're not selling very well does "high end enterprise device" mean something else now?

it is that they are not selling at all. It isn't the internals, it is that the platform has been passed by. They are surviving on Business and Government contracts, and that is going to fall next year.

BYOD is already a reality with some companies, and more on the way.

Knox is here and has Samsung behind it. They want in on the Government contracts in a big way to increase the cost effectiveness of the devices.

The other OEMS (Nokia, HTC, LG, Sony) are not going to sit by and let Samsung and BB have it. In reality, MS is in the best position to take this away from BB, but either way BB loses.

It doesnt take a crystal ball, just come out from under the sheets and realize what is going on.

I really doubt many people trust Microsoft for security now a days.

Owner of z30, z10, q10, iPhone 4 and 5, sony xperia z1

So what is the rise in share price about? Didn't we see this one other time and then the share tanked later in the evening?
Is this something to do with shorts being forced to cover or something? Is it possibly only a temporary thing?

It is temporary. It is called short selling. Some good news mixed with bad also plays into it.

It will settle on Monday and be down...

Not really,if BB comes out with news about another client adopting BES then the pendulum keeps going and more shorts will cover.(Peugeot)

You don't know what short selling means. Today is all about Shorts covering their positions by buying back shares so they can close out their short positions, locking in profits. They previously sold short, but now have to buy shares on the market to replace the ones they borrowed and sold. With 120 million shares trading today my guess is that huge short position in BBRY shares is a fair bit smaller now than yesterday.

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We learned John Chen sounds Chinese. Okay, humour aside we learned BlackBerry is projected to be profitable beginning in 2016 and the financial situation should allow the strategy envisioned by the interim chief executive officer to be fully realised. In other words, it is anticipated BlackBerry will be a viable concern as early as 2016 as its focus transitions from hardware, software and services to software and services while hardware design and manufacturing is outsourced to Foxconn.

I am ready to buy a Z30 but Sprint and AT&T do not carry the Z30. BB may go vertical but they need to make sure their phones are on all the major carriers.

Did he say anything about the Z or Q devices?

Did he say why they hadn't marketed the Z30?

Sounds to me the new tunnel vision is on the Foxconn product line.

Its going to be quite a while before we see if anything comes of this.

Meanwhile the cash keeps burning..

Since the Z & Q devices are already designed and built the only update would be to include the proper radio devises in the handsets and get the carriers to stock them. Or, BB could sell them online from their own store.

Let's see what the analysts come out with in their reports over the weekend and on Monday. Chen seems to have had a favorable reception but there are still many that are convinced that Blackberry is worthless in the long run. The Foxconn deal (started by Heins and the Board) was good move and brought home quickly by Chen. I like a CEO that likes to take action. If this filters down, Blackberry could become a successful company again.

I read a note of Colin Gillis from BGR on AP that Chen precised that Foxconn will only do the low end handsets for the masses but BlackBerry keeps building the very high end devices by its own in order to keep the security requirements of their enterprise customers (technically and in licensing terms)

Hope so, as a CIO of bank/govt/military I wouldn't feel comfortable with Foxconn devices...

What's your thought on this Chris?

Posted via CB10

I agree, flood the market with the low end to create quick cash flow. BB keeps the high end handsets in house and creates the vertical markets in banking/Wall Street, Gov, military, and medical.

It actually sort of does matter who manufactures BlackBerrys because the security is baked into the firmware on the devices.

I imagine BlackBerry must have found some way of securing the firmware write process.

Foxconn? Seriously partnering with those slave drivers in China... one of the reasons I avoided the iPhone was because of Foxconn and the working conditions those kids have to put up with.... Foxconn already has a bad image, why would BlackBerry want to be associated with the slave drivers who manufacturer the iPhone

Posted via CB10

At the end of the day, it's business. The downside is that business has no conscience so the "working conditions" become a moot point.

In a lot of other media relating the event, I read that Foxconn will manufacture low end Smartphones for growing fast countries, but high end ones still be made by Blackberry.

"Mr. Chen, 58, said that while BlackBerry will continue to focus on the design and construction of high-end smartphones, Foxconn will be tasked with building lower-cost devices for emerging territories, “filling the gaps” in the company’s product offerings." (http://business.financialpost.com/2013/12/20/blackberry-ltd-chen-turnaro...)

It wouldn't make sense to not offer BES on lower end devices while still supporting Androids and iPhones.

And I wouldn't call BB10 reliable. Let's see what 10.2.1 brings to the table in that department.

(and you get any potential BBM upside for free at this point).

For some of us the play IS about BBM.

so in the future if all high end devices are only going to be enterprise, will it be possible for me as a non-enterprise user to get a flagship phone from a regular channel like rogers?

The channels might not be as diverse, but of course you'll be able to buy.  They'll just be designing with enterprise customers in mind first, whatever that means.  And they should price them accordingly.  Consumers can keep buying them.  It would be dumb to shut out a customer handing you money.

They should open kiosks in all the Keg restaurants with sexy girls to sell you ,on your way to the toilette while your wife is flirting with the sexy waiter.No harm done ,ha ha..but I bet you ,it would work!!

you cannot. the majority of consumers want instant gratification. Granted that is getting more lenient, but if I wasnt a tech guy and wanted a phone, I would walk into the store and buy whatever. Not really order it from somewhere and wait a week.

Excellent writing Chris, thank you again. "Consumers can keep buying them." I just did today, finally, because now that the company sound better than ever, I upgrade from my Torch 9800 to the Z30. I feel great for staying loyal to BlackBerry. Merry Christmas and Happy New Year 2014.

Thanks Chris, you "really" have a great insight/understanding of these matters. I appreciate a lot how you can put your thoughts/perception into words so that a layman such as myself can understand. John Chen is exactly what BlackBerry needed. I'm very happy for BlackBerry that he has taken over as Boss. Sounds like some exciting times are ahead for BlackBerry and those of us who love the BlackBerry products. Long love BlackBerry. Keep it Moving! :)

Do we have an estimate of the crackberry community that has a business phone versus a personal phone? My fear is that business demand is flat. It's the personal market that is most dynamic, growing and high value. Maybe as a base, it's fine to focus on enterprise, but as we have seen in the past five years, the real market is the consumer market. BlackBerry has to take on Apple and Samsung....

Posted via CB10

Super says : *ROAR* !
Nice article Chris, thank you.
Q: Can I quote your conclusion as a disclaimer somewhere in the forums ?

For me, this post just confirms that Blackberry is here to stay. Just a gut feeling. I don't pretend to know all the ins and outs of what's actually happening to today but I feel this is the "right way" way to proceed. I don't agree dealing with Foxconn but Blackberry needs to remain competitive to stay alive. One of the main reasons I stick with BlackBerry cus of their unique business practises, but they need to do what's necessary and I understand that. For what I have read today, gives me more hope for BlackBerry, which is why I'm going to buy more shares and stick with it in the long haul. Yes, the numbers are dismal, but there are SO many factors to BlackBerry and still a huge potential just waiting to be fully realized again.

Had it been the old CEO, BlackBerry would have been in shambles by now. Chen is clearly the right man for the job. I am interested to see how fast BBRY can convert its existing 80,000+ BES customers onto BB10 and BES10.

Very well said, and yes, this guy is good. Remember how esoteric and vague Heins was ? ie 'Mobile computing platform'. Chen takes once sentence to explain the same thing that Heins needed a book to explain. I couldn't believe how simple he spoke on CNBC - a real breath of fresh air.

So you are out? Now you have the option to buy a android or a iPhone all built by Foxconn or other companies like Foxconn... where is the point?

Posted via CB10

It's only the Indonesian cheapo model that Foxconn is making, not your high-end berry...

Or did I get it wrong?

My name is Prem, I'm using BBM ... from my QuZe10 ...whatarhyme...

So glad I'm a grown up and can buy stock. What a totally condescending ending to what I consider a fair assessment of the situation BlackBerry is in.

Posted via CB10

It is only condescending to people who don't get the comment :)

If you got the point and agreed you wouldn't be offended.

Were you?

Posted via the Android CrackBerry App!

"take responsibility for your own decisions. If you’re going to complain and blame someone else for an investment loss then you are not enough of a grown up to own stocks." So this site is Crybaby Central then, as you people have NEVER owned up to the mistakes made by Blackberry, and always are coming up to insane excuses as to why you lost nearly 100% of your market share and profits.

100% of what market? At it's most popular BlackBerry only had around 3% of the cell phone market. I don't suppose their share is much less than that now. Whiles sales have dropped over the past few years, it's not by that much. What has hurt is margins.

Profits for sure is a problem. Just as is it is for many other smartphone manufacturers. There's no real money in smartphones unless you're Apple. And even Apple has nowhere to go market share wise other than down.

The ending was perfect actually. It's in reference to what was brewing in the forums where novice stock buyers were blaming Chris for bad advice, etc etc

Love that last line on whiners.

My grandfather always told me to invest in what i use every day not what i loved and to be a man about it.

Posted via CB10

OK, this deal has taken months, at the very least 6 to 8
months, I guess 10 He has a device in his hand, somebody must have designed it, set the specs, etc etc... then they ask faxconn to make a few protos and they both send em back and forth a few times this takes months if the phone is coming out next year, they will need to have finished drivers, set the feature set in,stone, the final specs... No way you could do that in 6 months, we are December

The bb10 devices are great, I come from iOS and these things are the best for business - sadly BYOD, But still.

Posted via CB10

Who....yaaa....sweet news on blackberry get rid of the slugs and get some real people that want to create great phones....instead of people that work for Apple and android kind of like the nonexus fag that's snooping on all the true blackberry fans....

From my Z30

Once the dust had settled and once the $4.4B loss had lost its shock value things started to make sense and I've got to say despite anything, I feel more confident about BlackBerry's ultimate survival now than I have for a very long time. Thanks, Chris, for making what was bouncing around my cranium make sense! I don't know if anyone had caught this, but in the earnings call Chen mentioned that some of these deals and decisions, including the one with FoxConn, were already in motion when he came on board. Maybe a tip of the hat to Thor wouldn't go amiss.

I really like this guy Chen. I bought 2000 more shares yesterday. I like his business plans build the low end hardware where its belong.

Chris, thanks for the quick analysis.

It was a pleasure listening to the call this morning. I share your feeling that John Chen is a man of action. Certainly, he has a great patter and was easy and fluid in his delivery.

The market seems to agree. (How much of the select calls/questions are set up in advance? The flow seemed smoother than i've seen in other meetings.)

I appreciate your use of the "Pareto Principle". It is clear enough that the fastest path to re-establishing the BlackBerry brand is to concentrate on large enterprise users. Selling one person or even a committee to realise thousands of unit sales simply makes sense.

A significant feature of BB10/BES10 is Balance, which only makes sense (and can only be activated presently) in an enterprise environment. I'm sure that there are more "hooks" that can be implemented in BES10 that can influence the future device choices of non-BB users in a BYOD space. So, this is a path that makes sense to me.

However, I am troubled by the actual per share numbers reported today. Are they not bad by any measure?

Posted via CB10

Another awesome article Chris. Great insight when you write in the Globe and great insight when you write on Crackberry.

Posted via CB10

What we learned is the news has reported BlackBerry lost 4.4 billion in the last quarter and their old phones outsold their BB10 devices showing that no one wants them. It is the death of BlackBerry. Wait till Q4 results.

Posted via CB10

About the "high end" devices, is it just me or if they could bring to the table a higher build quality (say iPhone or better) with more refined materials, I would be glad to spend few hundreds more on it?

I feel that there current high end devices where timid in price. They need to understand that BlackBerry high ends are not for wannabes

Give me exclusive branding, give me leather, give me cold stainless steel, poor it on me!

Posted via CB10

As long as devices are accessible for the regular guy, i'm good. This was an excellent article Chris indeed. Now i'll bow out and pick me up a few more shares of BBRY. Why? I believe and I'm not afraid :)

Posted from BitPusher's Q10

My only fear with Foxconn is that they won't let BB devices look better than the iPhone because they won't lose their contract with Apple over a few million BB's.

I defer my judgment until I see the quality of the new software and hardware.

I can't wait to see Mr. Chen address the root causes of RIM's fall:

- Corporate governance and accountability;

- High tech labor shortage in Canada.

To clarify:

I think Mr. Chen definitely made the right moves so far. He is absolutely a great leader. But BlackBerry's major problems are yet to be addressed.

Whats up Chris,

It was a pleasure listening to you on the podcast this morning unfortunately i cannot say the same for Kevin, Blaze and Adam!!

No offence but you guys need to either stop doing podcasts get with it.

-Blaze is always quite and well looks blazed the majority of the time
-Kevin is all over the place in incoherent with his comments. Yeah i get it was early and no coffee but still!
-Adam I like Adam a lot but he always mumbles through his sentences, seems like hes always nervous and unsure of himself. speak up man! its a podcast haha

BlackBerry is ike Titanic on its last few hours... it's inevitable going down but has to salvage what can still be saved... and wait for another ship to come...

Posted via CB10

Among countries that have been supporting blackberry well are Indonesia, India and Africa. With BB10, it appeares to be pretty expensive for these countries. BlackBerry should thank them and make cheaper version of BlackBerry 10 for them. So far Chen had announced that they are looking forward to make one for Indonesia. Hope he'll look into these other two countries as well.

Posted via CB10

I want to see our hear how Chen plans to sell more devices and improve bb's image. Supply chain is great but if Heins had not built way too many Z10s it would be much less an issue.

I do think that Chen is a masterful politician and pitch perfect for managing Wall Street. What a stark change!

I didn't realize they would be shifting all manufacturing to Foxconn. I figured it was just device specific for the models they were going to market to emerging markets. I wonder how much design input will come from BlackBerry vs Foxconn on future models?

Posted while peeking and flowing on my incredible BBQ10!

They said BlackBerry will have the design and engineering guys on it!

Sent from my BlackBerry - remember me!

If Foxconn design and build the low and mid-tier devices and BlackBerry design the high-end (enterprise) ones, who will build those?

I'm deeply impressed with how forward thinking John Chen's game plan actually is, it isn't a stretch of the imagination to suggest a return to profitability isn't a matter of "if", but "when".

This deal with Foxconn is the right move. BlackBerry 10 is the right foundation with far more potential than we've been able to see so far, and now the engineers based in Waterloo can focus on making it the OS we all know it was meant to be and it's only a matter of time before the world again begins to take notice at what BlackBerry can do.

We'll also see the return of the company issued BlackBerry being that much sought after badge of honour.

Nicely done Mr. Chen.

Sent from my BlackBerry Z30

How will Chen get more people to buy BS10 devices? Everything else sounds great. His delivery is great. His execution on changing the supply chain is great. But how can he get more people to buy?

I listened to the conference call but don't remember hearing a game plan about this.

Wow, BlackBerry needed to have this guy in charge years ago. Then maybe things could have been different. Obviously in hindsight everything is 20/20 but maybe just maybe Mr. Chen will be able to return BlackBerry to at least respectability...

Instead we had to live through the crumbling leadership of Jim Balsilille and Mike Lazaridis the two ass clowns of the apocalypse, then the second hand and highly stale and uninspired leadership of Thorsten Heins Ketchup...ughhh...the Cryptkeeper aka Pringle Watsahisname should be the next one to be pushed out...

I just hope that as a customer I will still be able to purchase BlackBerry devices in the future. If Mr. Chen can deliver on that then I'm allright with it.

Hopefully BlackBerry won't poo poo on their non enterprise customers. There might not be many of us, but the least they can do is be loyal just as we have since we chose to hedge our bets with them. Let the PlayBook episode be a lesson on what not to do to your customers.

Cartman says: Screw you guys I'm going home!

Chris, I believe that this is one of your 2-3 most articulate, most logical and objective blurbs you have presented. As most subscribers to CB are undoubtedly BB10 users, Chen's news confirmed what was easy to see for the unbiased. BB had/has in infinitesimally low probability of survival if they kept primary emphasis on OS10 as the key to their future. Instead Chen (and Prem) preaches retrenching to the only core business that BB genuinely holds today (corp/govt enterprise type servers/services) while downsizing/outsourcing more otherwise "direct" mfr. of hardware, eliminating their physical plant (i.e., real estate) in Canada and elsewhere, obviously gutting the employee roles, and going to make a concerted last stand rather than simply fade into the woodwork. If nothing else this will stop the bleeding of cash albeit solidifying BB as a background mouse rather than rekindling it as a lion.

It bothers me that BB will rely, just as nearly all other tech giants that have fallen over the years, on govt contracts (ominous sign) but, at least, BB also has a reasonable % of its business still tied to large corporations.

However make no mistake: The most impressive performance of Chen and Prem to date has been the grooming of a small group of institutions to enthusiastically box and prop the stock. Amidst much more dismal results than most could have imagined, Chen/Prem primed what was left of the BB PR pump to boost a BBRY calendar year/qtr end spike beyond $7 with emphasis on a new plan and riding the coattails of impressive U.S. qtrly GDP. (Simply fees alone from a 20% turnover in BBRY shares alone had to total $20+mm.) Extrapolating from your objective inference, Chris, it's fair to say that OS10 unit sales may be rounded to zero and there's hardly any need to discuss revenue and net loss even with the understanding of non-recurring. When a company guts its staff amidst an announcement of yet another grand plan, some short-term financial excuses are often cited that excite a share price (as expected on Friday). But it is the work-in-progress for two generations down the line and a future ability to attract a (new) pool of innovative talent that historically has shown itself to be the unseen cost of such cuts.

I'm saddened as a BB10 user to have what was inevitable confirmed even as I understand Chen's necessity to implement a plan of real focus to perform for the (now) tight grouping of majority (or controlling if we are to distinguish) BBRY ownership. Thanks, Chris, for your opinion and candor.

I think blackberry needs to discontinue the production of legacy devices. Not discontinue the support for them but discontinue the product itself. I think if they did this then they may see the shipment of more BB10 devices because it would force people in higher end enterprises markets, who want to continue using BlackBerry to upgrade to blackberry 10. If we must keep the legacy devices then sell them only in the lower end markets.

Posted via CB10

I truely think John Chen has what it takes to turn around BlackBerry's future :)

C0038297E Quote of the Day (BBM Channel)

Chen is the best thing to happen to BlackBerry after launch of BlackBerry 10 devices. He certainly has a strong vision and game plan .Next few months will definitely close the gap with other smart phone manufacturers. BlackBerry has nothing to lose at this juncture !!!!

Posted via CB10

In hardware side, chen once to increase bb 10 presence in making jakarta while decreasing cost with Foxconn's connection. Here in Indonesia, bbm is hitting big with low cost android costin around 100 USD and less (bunddling-pre installed)prob. Happened in Africa, Latin America and South Asia. If BlackBerry 10 base r large enough it will draw dev into makin apps. In developed countries he will supply high end products to maintain BlackBerry presence while waiting for the base to be large enough indeveloping markets. With foxcon connection it will also be easier for BlackBerry to gain foot in the largest market of em all China and do d apple moves. U will see.... BlackBerry is makin a come back just like apple did ....

Posted via CB10

What bothers me is Chens interest in Foxconn. This companies image is hurting Apple (not that Apple cares), but saving money with the stigma of slave labor is something Blackberry should try to avoid. I will not be buying a Foxconn device, and that is why I do not own an iPhone. While companies like Microsoft see the potential of making US models in America, other companies rather max out their profit margins (Apple), that are unsustainable, and damage their reputation as an ethical business.

Posted via CB10

Well I think thor did a great job on bb10 the only thing he miss is the apps. Iove my z10 i think this phone is way better than any other phone. But u know how market goes.... u need to have more apps!

So I hope Chen take note of this.

More apps please

PS: with up coming 50 shade of grey movie i think this phone has a good shot!

Posted via z10

I like that Foxconn ( which makes Apple products ) is going to participate in making Blackberries too. People who just listen casually to the news might juxtaposition two brands. Well done John.

Posted via BlackBerry Z10

Say it again : be responsible and if trying to use BlackBerry stock as a way of making money... then don't complain like an infant if you don't make instant money!! Go BlackBerry Go!

Posted via CB10