Live support
We are sorry, but support is not available at the moment.
04
Oct
2013

BlackBerry gets the blues

POSTED BY Windsor Holden
The mobile handset market appears to be in the business of emulating London buses. You wait ages for a major development, and then two come along at once. No sooner had Microsoft confirmed that it was to acquire Nokia’s handset arm, than BlackBerry issues a profits warning, cuts several thousand jobs, and then is rumoured to be the target of a bid from a private equity firm.

I have already covered Nokia’s travails in some detail. Now for BlackBerry.

In terms of handset sales, BlackBerry (then known as Research in Motion) reached its high water market in the second half of 2010, when everyone had (in many cases, somewhat belatedly) realised that consumer smartphones were where it was at, and were carried along in Apple’s wake. In the three months to the end of August 2010, RIM clocked up some 13 million smartphone shipments and more than $4.6 billion in revenues; in its most recent quarter, smartphone shipments had fallen to a paltry 3.7 million against revenues of less than $1.6 billion; the costs of sales were now exceeding the revenues earned.

Just to put this in perspective, the last time BlackBerry shipments were at this level, the iPhone was just two months old and BlackBerries were outselling them by more than three to one, and the App Store was just a twinkle in Steve Jobs’ eye. At its peak, RIM accounted for around 22% of global smartphone shipments, ranked second only to Nokia; the latest results indicate that its share has fallen to less than 2%, barely one-tenth of that of Apple.

BlackBerry has said that it “believes that the significant decrease in hardware revenue and device sales over the prior fiscal year was primarily attributable to decreased demand and lower sell-through for the Company’s new products, due to the maturing smartphone market and very intense competition, as well as lower average selling prices compared to the second quarter of fiscal 2013”. (That’s pretty much it in a nutshell, although I could – and will – add “and increased demand for Samsung and LG”.) It also adds that it “believes that uncertainty surrounding its ongoing strategic review process may have negatively impacted demand for the Company’s products in the second quarter of fiscal 2014”. Again, yes; although quite what effect the uncertainty surrounding its future ownership will provoke remains to be seen.

Without speculating too much on BlackBerry itself, what one can say is that when a company starts on such a downward spiral, it can be exceedingly difficult to pull out. Less handsets shipped means, fairly rapidly, a diminishing installed base of handsets; this in turn means less revenue from associated services; it also means that developers – faced with a smaller service user base – become less inclined to create applications for that OS; with less applications, consumers become less inclined to but handsets. Repeat ad infinitum.

It is possible, of course, that acquisition by Fairfax, Cerberus or anyone else willing to inject around $5 billion will arrest this decline. But with Android handsets dominating the smartphone space, with Apple still well set, and with Microsoft likely to see some improvement in its market share, the immediate prospects for BlackBerry are not good.