As smartphone manufacturer BlackBerry has struggled to turn its fortunes around in recent years, it hasn’t had many friends in the analyst community. Which may be why the Waterloo, Ont.-based vendor is seeking to highlight a Yankee Group report that breaks from the doom and gloom narrative.
In a report titled “BlackBerry’s Actual Results Refute Rumors of its Death,” Yankee Group analyst Carl Howe analyzes Blackberry’s earnings, which included a loss of nearly $1 billion on the second quarter and the writedown of a massive amount of unsold smartphone inventory, and concludes that while the grave has been dug and the casket readied, BlackBerry isn’t actually dying.
While he acknowledges the top line numbers are bad, although not unexpected, he urges observers to hold the funeral dirge and consider a few facts that he believes are being overlooked:
1. BlackBerry is selling more phones than several other manufacturers
“Nokia proudly states it sold over a million Lumia phones at the end of 2011, its first full year of Windows Phone availability. BlackBerry sold that many Z10s in its first quarter of sales. Even in BlackBerry’s so-called disastrous second fiscal quarter, sales of BlackBerry phones exceeded those of other high-profile phone launches such as the Motorola X and HTC One. If BlackBerry is dead, those companies should be too – and they aren’t.”
2. That near-billion-dollar loss is all non-cash
“Further, the large write-down of unsold inventory in Q2 clears the way for better operating results in future quarters; BlackBerry now has much better data on its device demand and supply chain needs.”
3. The company has U.S. $2.6 billion in the bank
“Despite its troubled earnings, the company remains cash-rich and shows little sign of drawing down those assets. Unlike many other troubled companies, management appears to be working hard to live within its means, as exhibited by its hard-line Cost Optimization and Resource Efficiency program, and its plans to cut its workforce back to 7,000 employees. And the company is still winning customers: Consulting firm KPMG announced it bought 3,500 new BB10 devices and committed to BlackBerry Enterprise Server 10 just this week.”
While a sale or going private, as Fairfax and other rumoured suitors have proposed, won’t solve BlackBerry’s operational ills, Howe said it will buy time for BlackBerry to complete what BlackBerry CEO Thorsten Heins has called a “multi-year” turnaround effort.
“It’s very difficult for a company like BlackBerry to go bankrupt when it has a multi-billion-dollar revenue stream from existing products and billions of dollars in the bank, regardless of how many reporters try to write its epitaph,” wrote Howe. “We believe BlackBerry’s refocusing its efforts on the enterprise market and away from the consumer one is a sound strategy, and that BlackBerry still offers differentiated value for security-conscious businesses, many of which cannot accept the lower levels of security offered by competing platforms.”
