Name Change, a Million Units Baby, a Surprise Profit and More From BlackBerry

Rahul is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

” It was a year for change and we delivered significant positive change.”

                                                      - Thorsten Heins, BlackBerry CEO

There couldn’t have been any better way for BlackBerry (NASDAQ: BBRY) to get back at the critics than with the latest quarter’s performance and a smashing Z10 sales volume. The company is in the middle of a lot of changes, such as change of name, change of image and definitely changes in investors' perceptions. Analysts, investors, industry experts and people like me (read people who love underdog stories) have been eagerly waiting for the Canadian smartphone maker to come out with its quarter numbers, and the wait is finally over. On Mar. 28, the company reported its fourth quarter and full year 2013 earnings and has got many close followers intrigued. Let’s take a peek into the quarter and its numbers.

The quarter and its numbers
BlackBerry took a lot of analysts by surprise by posting a better than expected bottom-line and beating expectations. However, the top-line of the company was slightly below expectations. The Canadian phonemaker reported total revenue of $2.68 billion for the fourth quarter and a quarterly GAAP income of $94 million, or $0.18 per share. After adjusting for pre-tax charges of $29 million related to the CORE program, the net income per share came to $0.22. But, the full year performance was not pleasing at all as the company's reported total revenue of $11.1 billion (down from $18.4 billion in 2012), and a loss of $646 million.

<table> <thead> <tr><th> </th><th> <p><strong>Q4 2013 (Mn)</strong></p> </th><th> <p><strong>Q3 2013 (Mn)</strong></p> </th><th> <p><strong>Q4 2012 (Mn)</strong></p> </th></tr> </thead> <tbody> <tr> <td> <p>GAAP Net Income</p> </td> <td> <p> $ 94</p> </td> <td> <p> $ 14</p> </td> <td> <p> $ (118)</p> </td> </tr> <tr> <td> <p>GAAP Net Income per share</p> </td> <td> <p> $ 0.18</p> </td> <td> <p> $ 0.03</p> </td> <td> <p> $ (0.23)</p> </td> </tr> <tr> <td> <p>Adjusted Net Income</p> </td> <td> <p> $ 114</p> </td> <td> </td> <td> </td> </tr> <tr> <td> <p>Adjusted Net Income per share</p> </td> <td> <p> $ 0.22</p> </td> <td> </td> <td> </td> </tr> </tbody> </table>

(Source: BlackBerry Press Release, March 28, 2013)

For the fourth quarter, BlackBerry’s top-line came at $2.68 billion, out of which $1.63 billion (61%) came from the handset business and the remaining was contributed by the software (3%) and service (36%) segments. During the quarter, the company was able to sell as many as 6 million phones, thus resulting in revenue per handset of $272 (thanks to the inclusion of the latest Z10 devices), up sequentially from $237, though sequentially number of handsets sold plunged from 6.6 million. Alongside, the company also shipped 370,000 Playbooks, up from 255,000 Playbooks in the previous quarter. However, BlackBerry’s subscriber base fell to 76 million from 79 million.

The million units baby
When speaking of numbers, there is one more number which deserves special mention – the one million BlackBerry Z10s sold. Though not a very big surprise, yet it’s delightful news for the company and its investors. The figure came at the top end of analyst expectations of 0.3 million to 1.2 million, despite the fact that the number doesn’t include the Z10 sales in the US, since the handset was launched a couple of weeks after the end of the latest quarter. Though a specific number for US is not available, one can imagine how huge the till date sales of the device can actually be, considering the US is a very lucrative market and represents about three fourths of BlackBerry’s worldwide market.

While major credit assessment bodies had been moving BlackBerry up and down the rating ladder, BlackBerry fans had a hunch that this was coming. For months the smartphone maker had been struggling, facing stern comments from industry experts on how poor a choice it was for the company to not launch BlackBerry in the past holiday season and how the company itself was helping Apple (NASDAQ: AAPL) crush it and how it was allowing Nokia to gain a better hold on the market. Even CEO Thorsten Heins had been highly criticized for some of his decisions. However, now that the latest platform is out and running, many of the critics were forced to change their opinion about the phone maker and its captain. Some have even started wondering why BlackBerry didn’t launch the Q10 (keyboard version of the BB10) alongside the full touch model to make the traditional BB users happy.

The latest on the smartphone space
According to the latest report from Gartner, during the calendar fourth quarter, BlackBerry sold 7.3 million handsets and had a command over just 3.5% of the market, whereas Google’s (NASDAQ: GOOG) Android continued to be at the top spot with almost 70% market share and Apple came as a distant second with about 21% share. Compared to these biggies, BlackBerry is far behind in the market share race.

<img alt="" src="" />

However, the good news for BlackBerry is, as mentioned in the earnings call, about 55% of the Z10s were sold to users who were migrating from other operating sources such as Apple’s iOS, Android and Microsoft’s (NASDAQ: MSFT) Windows Phone and management feels very positively about the future prospects of the platform. Enterprises have always been the strongest customers for the company. But now, gradually, even consumers have also started taking interest in BlackBerry products. And with the increasing interest from consumers, the need for apps is increasing even more. BlackBerry started off 70,000 global BB10 apps and recently it added another 30,000 apps, taking the total count to 100,000.

But, we must not forget that all the top players of the space have put their best foot forward. Samsung is ready to battle it out with its latest Android Jelly bean powered Galaxy S IV smartphone and Nokia and Microsoft are not holding back from promoting the Lumia 920. Even Apple is rumored to be acting on the successor of the iPhone 5. Though the latest iPhone continues to be the number 1 selling smartphone, it still hasn’t been able to meet up to the expectations and this is what Apple intends to address with the iPhone 5S.

One more point that BlackBerry needs to think about is, with the present Z10 and the soon to be launched Q10, the company will be targeting only the top layer of the market who can afford such expensive handsets. In order to gain sustainability, BlackBerry can’t just focus on the high-end market. Its peers, Samsung and Nokia, have launched a fleet of devices that are addressing the needs of different segments and the same needs to be done by the Canadian phonemaker also. The company can’t rely on its older BB7 platform to compete with the latest Android and Windows platforms. Users seek new and exciting OSs and if BlackBerry can’t figure out a way to offer the BB10 to the remaining segments, it will again start facing some harsh times.

Final thoughts
Overall, the company posted some pretty encouraging numbers for its stakeholders and even its efforts to improve its future performance seem to be making sense. The phonemaker also aims to invest heavily in its marketing muscle to promote its flagship device and it’s pretty clear that the firm won’t face any budget related issues thanks to the huge pile of cash on its balance sheet. BlackBerry is also going to expand its network as it has decided to make its BBES10 system to Android and iPhone users. Strong Z10 sales, brilliantly managed cash pile and the ability to manage through tough times and see the light of the day – all these suggest the company has potential. For all we know, the fourth quarter results may be just a teaser of the bright future this company can have.

Rahul Chattaraj has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus