Is There Any Hope Left for This Struggling Smartphone Maker?

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When you believe that something will work and it doesn't, the only thing that is left behind is the feeling of being shattered. After the most recent quarterly earnings release of BlackBerry (NASDAQ: BBRY), investors would have felt “shattered” with not much confidence in the company, as the lack of investors' faith had sent the stock down more than 25% in a single day.

BB10 was BlackBerry’s hope for revival, a much needed turnaround, but sales have slowed down after an initial sale of 1 million Z10 phones which happened in only one month of its launch. While in the previous quarter there were two smartphones, the Z10 and the Q10, shipments were below the expected 3 million to 4 million BB10 phones.

BlackBerry’s management did not specifically disclose device sales on its earnings call, but it mentioned that about 2.7 million devices of the 6.8 million phones shipped were BB10 handsets. This means that about 60% of the sales still come from BB7, which means the company needs to really think how it wishes to proceed with the older operating system and devices.

As the company has a number of BB7 users, it needs to continue running that network whose expense is only a fixed cost. Further, the company is coming up with another BB7 device which can only possibly mean that BlackBerry has still not found a way to completely transit to the new operating system. The worst case can be that the company has not found a way to run BB10 on cheap hardware that can make the company’s prospects very bleak as the market is shifting towards low-end smartphones.

Further, in the last three quarters, the company has lost over 8 million subscribers. Going forward, the company has decided to stop reporting the number of active subscribers, which I believe in no way is a bad sign as none of its competitors have been reporting it and its reporting of the information was being used against it. 

BlackBerry is losing its market share in many of the developed countries. Last year in May, it had 4.6% market share in America, which dropped to a meager 0.7% this May. The story is no different in the U.K. as BlackBerry’s 12.6% share dropped to 5.3%, and in Europe its 7% share fell to 2.5%.

Developed markets don’t seem great for BlackBerry’s growth, but it is performing comparatively well in emerging markets like the Middle East and Africa. BlackBerry’s performance in Asia has been robust, as its revenue increased 27% year-over-year. If the company wants to be viable in the future, it cannot overlook the demand from low-end Asian markets and other emerging markets.

Another turnaround

Nokia (NYSE: NOK) is another company that lost a major portion of its market to Android and iOS in the last two years. Just like BlackBerry, Nokia, too, came up with a new OS in partnership with Microsoft, but to Nokia’s advantage, it started the transition early in Q4 2011.

Nokia's Lumia handsets are starting to gain traction now. Their sales are increasing quarter on quarter, as in first quarter of 2013, the company sold 5.6 million handsets, a 27% sequential gain from the last quarter of 2012. Going forward, management expects sales to hit the 7 million mark in the current quarter.

Nokia also has a portfolio of phones with the latest OS at approximately all price points, which further places it in an advantageous position.The launch of the Lumia 928, 925, and economical Lumia 521 should only boost Nokia's sales. Currently, Nokia is clearly the number three player in the smartphone race, though relatively small, but it’s moving in the right direction.

Further, smartphones are just a segment of Nokia and its other segments are also delivering without affecting the company’s smartphone sales. Nokia is clearly the winner among the two companies trying to turn around and save themselves.

More devices coming up

None of BlackBerry’s devices are inferior to any of the other smartphone players, but the problem with the company is that it is not being able to find the right set of strategies to promote them. Going forward, the competition will only get tougher. Sometime this summer, the Moto X phone from Motorola, Google’s (NASDAQ: GOOG) largest acquisition, is expected to be launched.

The device will run on Android OS 4.2 Jelly Bean and will be an LTE-enabled device. The rumors about the specs of the Moto X are that it has a 4.7-inch full HD screen, NVIDIA Tegra 4i processor, 16 MP camera, and a 5 MP front-facing camera.

BlackBerry should beware as strong competition is coming up, and Apple would probably make things worse during the holiday season.

Final words

BlackBerry, at the moment, seems to be a lost ship with no vision, and the competition is hammering it. BB10 is not as successful as was expected. The company’s turnaround has not yet delivered and it needs to do a lot to become a desirable investment in the future.

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tarun bachhawat has no position in any stocks mentioned. The Motley Fool recommends Google. The Motley Fool owns shares of Google. 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!

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