BlackBerry surprised investors and analysts when it announced on June 19 that it was able to post a small, $23 million profit during its first fiscal quarter. However, the profit was due only to noncash accounting changes. If those changes were excluded from the financials, the company would have lost $60 million. Still, BlackBerry said the results were encouraging. The pre-accounting loss was far better than expected by Wall Street analysts, and revenue slipped just 1 percent to $966 million. Even better, BlackBerry’s cash reserves grew to $3.1 billion, thanks to real estate sales. The news was met with relief by investors, and shares were up after the announcement. It also helped breathe some life into BlackBerry’s future prospects, which was hit hard by the steep declines of its smartphone models in the past few years. BlackBerry CEO John Chen said that there’s reason to be optimistic about the company’s future. This slide show examines BlackBerry’s latest earnings report and looks at some of the ways that the company is trying to add momentum to the recovery.
10 Ways BlackBerry Is Trying to Drag Itself Back to Profitability
By Don Reisinger
BlackBerry Worked Hard to Raise Cash
BlackBerry has been on a selling spree over the last several months. Under CEO John Chen’s leadership, the company has been selling off a wide range of real estate properties across Canada. In addition, the company has dismissed thousands of employees to save money. Saving cash for investment in the company has been a key component in BlackBerry changing the tide.
Accepting the Changing Times
Chen should be commended for accepting that the times are changing rapidly. He doesn’t believe that he needs to maintain and control an entire ecosystem of applications and devices, and has instead opened up his platforms, like BlackBerry Messenger and BlackBerry Enterprise Server, to other mobile operating systems. Chen’s acceptance of the changing times has helped stem the tide of the company’s decline and provide hope it’s working toward a sustainable recovery.
Not Relying So Much on Hardware
Hardware isn’t everything in the new BlackBerry. As hardware sales have fallen, BlackBerry has turned its attention to software. BlackBerry Messenger has 85 million users worldwide and handles over 30 petabytes of data traffic each month. That’s a huge market that BlackBerry can capitalize on to build out its other services, including BlackBerry Enterprise Server. Mobile messaging is a huge market right now, and BlackBerry has a strong position there.
Shifting Handset Production to Foxconn Was a Smart Move
Foxconn is arguably the most interesting component in BlackBerry’s resurgence. The company has offloaded the production of its devices to Foxconn, which has helped to cut costs. In addition, Foxconn is helping BlackBerry expand its presence in emerging markets. The Foxconn deal could ultimately prove to be a key component in the future success of BlackBerry in several important markets.
Letting Amazon Do Some Heavy Lifting Is a Smart Move
BlackBerry announced June 18 that Amazon’s Appstore will be coming to its new BlackBerry OS version this fall. The companies will work together to combine apps and build out the Appstore, and now BlackBerry owners will have many more programs at their disposal. Best of all, BlackBerry doesn’t need to waste time trying to woo developers or managing its application marketplace. Again, it’s a win-win.
It’s Focusing on Emerging Markets
Emerging markets have proved to be an important market for BlackBerry. The BlackBerry Z3, a device aimed at emerging markets, has been selling quite well, according to Chen. The device is available in key markets, like Indonesia, and is integral to the future of BlackBerry’s hardware business.
Bring On the BBM
As noted, BlackBerry Messenger has about 85 million users worldwide, a huge number for a company like BlackBerry. So far, BlackBerry has done little to monetize that group, but Chen said during the June 19 earnings call that he expects that to change in short order. It’s not clear yet how BBM will be monetized, but perhaps via subscription fees or online advertising. Would BlackBerry even consider the sale of BBM to another company to raise more cash?
It’s Sticking With the Enterprise Market
The enterprise has become the central focus for BlackBerry. The company has made clear that although it will continue to target consumers to some degree, the future is in the enterprise in both hardware and software. The move makes sense. BlackBerry is still the leading secure mobile environment, and its BlackBerry Enterprise Server remains a favorite among IT decision-makers. The enterprise is central to BlackBerry’s success.
It’s Staying in the Hardware Business
Earlier on, we said that BlackBerry won’t focus so much on hardware. The company also won’t give up on hardware. Chen has said time and again that he believes hardware is still crucial to BlackBerry’s business, and judging by the company’s staying power in emerging markets, it’s hard to disagree. Look for BlackBerry to continue selling hardware, even if sales remain lackluster.
It Keeps Conveying an Air of Confidence
It’s often overlooked, but Chen provides an air of confidence that is very much needed at BlackBerry. In conversations with analysts and investors, he seems confident in the firm’s future chances of success and even said at a recent conference that there’s an 80 percent chance that BlackBerry is out of the woods. What’s more, he’s predicting a break-even or profitable year in the next couple of years. Part of a CEO’s job is to be confident, but Chen is exemplifying a level of confidence that has inspired employees and even made outsiders believe in the CEO’s turnaround program.
Don Reisinger is a freelance technology columnist. He started writing about technology for Ziff-Davis’ Gearlog.com. Since then, he has written extremely popular columns for CNET.com, Computerworld, InformationWeek, and others. He has appeared numerous times on national television to share his expertise with viewers. You can follow his every move at http://twitter.com/donreisinger.