Blackberry is Turning Around, But at a Slower Pace Than Previously Expected

Blackberry reported on earnings for the first quarter of fy 2015 on Thursday, June 19, 2014. As reported on the MobileWorldLive web site, John Chen, CEO, mentioned a likely return to profitability in fy 2016. But the pace of improvement is much slower than expected, based on management comments from earlier earnings reports.

Does the gap between the timeline Mr. Chen presented back in December, 2013, as part of his presentation to investors, and his latest pronouncements present a challenge for anyone following the performance of this business? Back then, many proponents of Mr. Chen’s ascendancy to the CEO position at Blackberry spoke positively of his past successful experience turning around Sybase, and seemed to look forward, eagerly to the second phase of his plan — marketing BlackBerry’s Messenger service to the market for enterprise mobile device management (MDM) software.

But, as I wrote earlier to this blog, Gartner has since released its Magic Quadrant for Enterprise MDM. Unfortunately, BlackBerry’s BBM is included, simply, as a “niche solution”, and certainly not one of the market leaders, at least according to Gartner.

So we can only conclude the first phase of Mr. Chen’s December, 2013 plan is still in process. Ken Willard, who wrote this article for MobileWorldLive notes “[t]he remainder of sales was made up by hardware (39 per cent) and software & other revenue (7 per cent).” On the other hand, the services business (not a focus of Mr. Chen’s December, 2013 plan) “represented more than half of Q1 turnover (54 per cent).”

In fact, it looks much more likely Mr. Chen will remain deeply engrossed with the challenge of squeezing profitability out of the hardware business at Blackberry for the next few quarters. Mr. Wieland quotes Mr Chen as using an abstraction to describe the pace of BlackBerry’s progress on this objective, “Chen admitted that BlackBerry had still to hit breakeven point on hardware, but added it was getting ‘very close’.” What may be very close for Mr. Chen maybe very far off for investors. Perhaps it is safe to say simply reporting the numbers, and leaving the task of “connecting the dots” to analysts would have been a better approach.

Disclaimer: I liquidated my entire investment in BBRY back in May, 2014

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved

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