Will BlackBerry reclaim its lost glory?

The industry and the competition is little perplexed after seeing BlackBerry posting one of the best quarters. An eventful last 3 months saw BB10 finally seeing the light of the day through z10 handsets-the company's ‘make or break' device.

The skeptics have rather toned down their assault on BlackBerry, which in the last one year has sort of fallen from the ‘media darling' status to one constantly hounded and compared with competition, and how it lagged behind.

Adding to the insult, its tablets did fail to make an impression with ‘Playbook' inventories piling up day-by-day, leading to losses. And it is in that context, the much-awaited update-BB10 through z10, though delayed, revved up the company's Q4 FY13 profit.

But, comparatively, apart from the profit in Q4 on a full-year basis, the company posted a net loss of $646 mn as against a net income of $1.2 bn in the fiscal 2012. As we look at the topline-for the fiscal 2013, the company made $11 bn as compared to $18.4 bn last year.

Meanwhile for Q4, the revenues stood at $2.7 bn and during that quarter the company shipped 1 mn z10 handsets- the much-awaited smartphone on which the company is pinning its revival.

Overall, the company shipped 6 mn smartphones during the quarter. Its subscriber base slipped to 76 mn from 79 mn. But the big sliver lining was the surprise profit in Q4, summing up to $94 mn.

"We have implemented numerous changes at BlackBerry over the past year and those changes have resulted in the company returning to profitability in the fourth quarter," says Thorsten Heins, president and CEO, BlackBerry.

Is BB on a Rebound?

"With the launch of BlackBerry 10, we have introduced the newest and what we believe to be the most innovative mobile computing platform in the market today. Customers love the device and the user experience, and our teams and partners are now focused on getting those devices into the hands of BlackBerry consumer and enterprise customers," he adds.

So is BB on a rebound? Despite it not having overall full year results? Dataquest spoke to Jack E Gold, founder and principal analyst at J Gold Associates, and asked his take on what he draws out of BlackBerry's dramatic Q4 results.

Gold says, "Given the expectations that most had, it did quite well. It had a profit and more importantly increased its cash position. That means it has the capacity to invest in marketing the new devices (BB10). The loss of subscribers is troubling, of course, especially in a key market like the US.

But the new devices really were not available yet to stem the losses. It's the next 1-2 quarters that will really tell the story of how well the devices are being received in the US.

The big challenge for BB is to up the marketing and get people interested in the devices. It indicated the rise in marketing spend by 50% in the coming quarter. That will help. It has to build some excitement to get people interested. It did indicate that 55% of sales of the Z10 so far were from non-BB users, so that is encouraging (although that was for other parts of the world, and it didn't say if that was for users of other smartphones or for upgrades from feature phones)."

Scouting for Partners

But clearly most of the analysts are taking a wait and watch approach. Blackberry's possible turnaround also comes at a time when there are rumors that Lenovo might invest in the company or might even announce a takeover bid.

In an interview to Bloomberg News, Heins when asked about the Lenovo takeover did not confirm it on the face, but rather diplomatically stated that "the company is always open to partnerships".

The truth is BlackBerry needs a strong financial partner to pump its outlook in the days ahead and much depends on the next 2 quarters on the global performance of BB10.

Gold says, "It had a pretty good quarter given the challenges it faced. It's very early on in the re-building of the brand and the new devices, but it seem to be off to a reasonable start (I don't think its reasonable to judge them along the same scale as an iPhone or Galaxy launch would be judged). The company seems to have effectively slowed down the bleeding to a trickle, while also increasing the cash it had on hand."

Do they have enough of newer devices apart from z10?

Gold says, "One of the key devices for their future, the Q10 isn't out yet, so I expect that the device will appeal much more to the traditionalist BB users and should have an uptick for them in sales. The need is to get the US carriers on board marketing wise, to do a better job of getting the message out in the stores. So the bottom line is, BB is certainly not dead yet and I think it is a mistake to count it out yet, even though it still faces some significant hurdles to overcome."

Outlook

Will Thorsten Heins overcome those hurdles? The next 2 quarters will unravel BlackBerry's long-term prospects in the smartphone market. Blackberry in the next few month will be investing heavily on marketing activities and as analysts say that it needs to rekindle the consumer interest, driving home the message that its new devices are ‘cool'.

The latest commercial for z10 also suggests that the company is targeting youth and trying to shrug its serious ‘only for enterprises' tag.

According to company sources, it will be increasing its marketing investment in the first quarter of fiscal 2014 in support of the global launch of BlackBerry 10. Including the anticipated 50% sequential increase in marketing spending, the company believes it will approach breakeven financial results in the first quarter based on its lower cost base, more efficient supply chain, and improved hardware margins.