BlackBerry faithful seen stemming sales slide

Bloomberg NewsJune 21, 2013 

— BlackBerry is poised to snap a five- quarter streak of declining smartphone shipments, a sign its recovery is gaining traction.

BlackBerry probably delivered 7.7 million smartphones to customers in the three months ended in May, a Bloomberg survey of analysts shows. That would reverse a plunge to 6 million units in the prior quarter from 11 million a year earlier for the Waterloo, Ontario-based company.

New models are the reason for the resurgence. Even if the touch-screen Z10 is getting a mixed consumer reception, pent-up demand for the Q10, which has a physical keyboard to appeal to the BlackBerry faithful, is fueling a rebound, said Maynard Um, a Wells Fargo analyst.

“The die-hard BlackBerry installed base of 76 million subscribers loyal to the keyboard presents a strong upgrade opportunity,” said Um, who is based in New York.

Um is among analysts who have raised sales estimates or ratings on BlackBerry in the weeks before the smartphone maker reports earnings on June 28. While BlackBerry steadily lost market share over the past three years to Apple Inc. and Samsung Electronics, it now has an opportunity to win back some consumers in the lull before the next iPhone arrives and after Samsung’s Galaxy S4 got mixed reviews.

“The new BlackBerry handsets are holding up reasonably well against a number of recently released handsets,” said Andy Perkins, an analyst at Societe Generale in London.

BlackBerry shares have climbed 16 percent this year and have more than doubled since reaching a nine-year low in September. An international BlackBerry service disruption that month, which coincided for a second time with the introduction of a new iPhone, was the culmination of years of marketing fumbles, product delays and other missteps by the company.

Since taking over in January 2012, Chief Executive Officer Thorsten Heins has named new sales, marketing and legal chiefs and squeezed out $1 billion in operating costs by cutting six of 10 manufacturing sites, eliminating 5,000 jobs and selling one of two corporate jets.

BlackBerry surprised analysts in March by reporting a return to profitability for its fiscal fourth quarter, earlier than expected. The company probably had a profit of 9 cents a share excluding one-time charges and gains in the first quarter, which ended in May, reversing a loss of 37 cents a year earlier, according to analysts’ estimates.

Sales probably climbed 20 percent to $3.38 billion from a year earlier, the estimates show. That would be the first year- on-year gain in eight quarters.

BlackBerry has no comment on its performance last quarter, said Rebecca Freiburger, a company spokeswoman.

Heins, a native of Germany, was criticized after he was promoted from chief operating officer to CEO 18 months ago and told investors no “drastic change” was needed at BlackBerry.

Regardless of what he said at the time, Heins has definitely shaken things up, said Colin Gillis, a BCG Partners analyst.

“He’s done a great job – he’s put up way more of a fight than people were expecting,” said Gillis. “The question is, is it too late?“

BlackBerry’s shipments are expected to decline again this quarter. In the current period, which will end in August, units will decline to 7.4 million from last quarter’s estimate of 7.7 million, according to the Bloomberg survey. That’s because shipments of older models will fall while sales of the Q10 will potentially peak after a wave of upgrades, said Gillis.

“This is the quarter where they’re likely to put product into the channel and the numbers may look pretty good,” he said. “The next quarter is probably going to be tough for them.”

BlackBerry’s share of the global smartphone market shrank to 2.9 percent last quarter from 6.4 percent a year earlier, according to research firm IDC. Apple’s iOS and Google Inc.’s Android operating system, which Samsung uses, together accounted for 92 percent of the market.

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