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Heins asks for more time to turn around BlackBerry

Wednesday 3 July 2013 | 11:38 CET | Background

BlackBerry shipped (not sold) in its latest quarter 2.7 million of its smartphones running BlackBerry 10, or 40 percent of its total shipments. This is a considerable increase on the 1 million sold in the previous quarter, but the company also reported a loss for the quarter and a sharp drop in subscriber numbers. BlackBerry continues to struggle on, and nobody knows what the future will hold.

BlackBerry continues to do the same as it has done since early last year: reorganise in order to keep its finances healthy and shareholders calm. CEO Thorsten Heins, who has been in place since early 2012, has had a difficult time with the old guard at the company previously known as Research In Motion and faced numerous calls for rigorous changes, from a complete sale to splitting up the company.  

Repositioning

While nothing so dramatic has happened yet, the company has thoroughly restructured and worked steadily on BlackBerry 10. The new operating system was presented this year after several delays, along with a new company identity and the first smartphones under the new system, the Z10 and the Q10.

Heins has led a much-needed investment in cultivating the developer community, while also positioning Blackberry 10 for the emerging Internet of Things. The CEO is not interested in the tablets market with its low margins and is instead focusing on high-end smartphones for business users (via BES 10) and consumers. However, the company's share of both markets has been under pressure for some time.

Amid the growing trend for companies to allow employees to use their own mobile devices at work (BYOD: Bring Your Own Device), many companies have been swapping their BlackBerrys for other brands of phone. Rival brands are in turn investing more in serving business users. Samsung for example introduced last year the SAFE label for its flagship Galaxy SIII. SAFE stands for Samsung Approved for Enterprise and offers a range of tools and services for managing and securing the device. Apple started two years ago its Volume Purchase Program for apps in its App Store and is especially pushing its tablets for the enterprise market. The upcoming iOS7 will have several new enterprise features and improvements in Mobile Device Management (MDM).

BlackBerry conquered the consumer market thanks to its messaging service BlackBerry Messenger (BBM). Once a unique selling point, BBM has since been overtaken by a range of new OTT messaging services, such as Viber, WhatsApp and Facebook Messenger. This contributed to BlackBerry's decision this year to make BBM available free for Android and iOS devices. BlackBerry claims around 60 million BBM users worldwide, of which 51 million use the service on average 1.5 hours per day. BBM users send and receive over 50 billion messages per day, according to the company.

Nevertheless BlackBerry 10 is still lagging in terms of the number of available apps and is missing key services such as Instagram and Netflix. Heins is surely aware as well of the growing popularity of Microsoft's Windows Phone and the falling margins in the high-end segment.  

If Heins has achieved anything, then it's repositioning a company that was stuck in an outdated structure and vision. BlackBerry has chosen not to attack head on, but instead to create its own niche aiming for the number-three place on the market after Android and iOS. The company has become more critical of itself, and Heins is not hiding the fact that offering BlackBerry 10 under licence to other manufacturers is still a strategic option.

Is it enough?

BlackBerry still has a strong cash position of USD 3.1 billion (+6.8% in the past quarter), positive cash flow (USD 630 million) and no debt, but its financial strength is diminishing as it spends heavily on promoting BlackBerry 10.

It's also losing ground on its lucrative services segment, which contributed 26 percent of revenues in the latest quarter. This is down from 36 percent a year ago. The drop in the number of BlackBerry subscribers started a few quarters ago has continued. It had 72 million subscribers worldwide at the end of May, down from 79 million three months earlier.

At the presentation of the quarterly results, Heins promised to launch more new products and services in the coming quarters. BlackBerry could look at products for new price points and new formats in order to match its rivals' offerings better. It will also continue to invest in BlackBerry Messenger and in "new services and emerging mobile computing opportunities".

What's worrisome is that the company lost money in its fiscal first quarter, despite the major makeover of the group and growing momentum for its new portfolio. It expects losses again in the current quarter and will continue to work on cost reductions in order to keep its finances in shape.



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