by Jean-Louis Gassée
Once the king of smartphones for business uses, Blackberry got a new CEO, a new operating system and new devices, with and without the traditional keyboard. In spite of these changes, the company's latest numbers don't paint a picture of revival.
Thorsten Heins doesn't suffer a lack of enthusiasm. During the run up to the March release of its BlackBerry 10 operating system, RIM's CEO painted an optimistic picture of a company on the rebound, a company that would correct the mistakes of the industry leaders:
"It's still the same," Heins said of the iPhone. "It is a sequential way to work and that's not what people want today anymore. They want multitasking."
Rechristened as BlackBerry, Heins told us that the company would energize the develop community and spawn devices that are too exciting to describe:
"There's one new product I'm really excited about, but I can't really share it," Heins told CNET in an interview today.
Last week, the company released its latest quarterly numbers and they are exciting, although not in the sense that Heins would like. The forecast was $3.4B in revenue and $0.07 in earnings per share; the reality was $3.1B in sales and, more important, a loss of $0.13 per share.
The numbers "excited" traders so much that BBRY shares lost 28% of their value in a single trading session, putting them back to their one-year-ago level.
The earnings release was followed by the customary conference call where the CEO and CFO review the numbers and answer questions from Wall Street analysts. Courtesy of Seeking Alpha, the call transcript is here and contains the obligatory pablum, including an excessive abuse of the F-word (22 occurrences):
Embracing our heritage of mobility first is very important as we build our culture and go through this transition. We don't have to be all things to all people and all markets, and embracing this focus allows us to drive efficiency, be flexible and agile, and to ultimately drive best-in-class innovations. [...]
We're continuing to focus on improving all areas of the business...
Curiously, there's no breakdown of the sales of BlackBerry devices. How much of their revenue was "energized" by the BB10? Without actual numbers, we're left in a cloud of doubt about how well the new platform is actually doing.
The disquietude continues: There are no subscriber numbers, and no guidance other than an expectation of more losses next quarter. The glowing comments about cash-flow from operations ($630M, a nice number) are undercut by the disclosure of a substantial tax refund, without which the company would have eaten through $400M to $500M of cash.
As for tablets, the Blackberry PlayBook is no more, says the CEO. He's unhappy with the device's performance and is determined to focus on the company's "core hardware portfolio". (The company's website no longer describes the product and only offers a software update for existing customers.)
Inevitably, the How Many Moves Remain? question comes up. Blackberry professes to do more than just devices, it claims to offer strong enterprise services and says it will propagate its BBM (Blackberry Messenger) to other platforms including Android and iOS. It also promotes a form of (limited) compatibility for (some) Android apps on its newer smartphones. But is anyone buying and in numbers that can save the company?
More to the point: Who wants to buy Blackberry (the company), for what reasons, and at what price?
Let's back up. Last week, we heard that Microsoft had once again given up on its perennial hunt to capture a handset maker. This time, the prey was Nokia, Microsoft's "special" Windows Phone licensee.
The official explanation for the Nokia blowup was that the price tag was too high, but price clearly wasn't an issue. Nokia's $14B market capitalization weighs in at about 5% of Microsoft's $288B. Even when you tack on a 25% acquisition premium, the purchase should have been a reasonably easy sell, especially given Microsoft's desire to take the handset business into its own hands, if only to counter (or mimic) the strategy established by Google and Motorola.
There's really only one explanation, as I speculated last week: The engagement was dissolved because of Microsoft's bleak view of Nokia's business, that the Finnish company no longer has the technological acumen and brand loyalty that Microsoft needs to make Windows Phone a legitimate competitor with Android and iOS.
BlackBerry's market capitalization now stands at about $6B. That's less than half of Nokia's. If Nokia, supported by Microsoft, can't gain ground on Google and Apple devices, what gives us confidence that BlackBerry isn't sliding into insignificance?
The BlackBerry name, as a brand, is strong. But a brand only exists as the carrier of a promise. A brand writes checks that the product cashes. Without a successful product, the brand dies (go ask Kodak).
While Nokia could be acquired by someone interested in the Windows Phone business, one is hard pressed to form a similar thought for Blackberry. It may be struggling, but there is a Windows Phone ecosystem, including handset makers. There is no such thing around BlackBerry. Developers aren't writing apps for BB10 in ecosystem-making numbers, carriers have taken a wait-and-see posture, even the core group of dedicated users (I used to be one of them) appears to be losing faith.
This isn't a brightly optimistic picture. Today, Blackberry finds itself caught between Samsung and Apple at the high end, and a rabidly fermenting crowd of Android (official or not) clones at the lower price range.
So, why not consider heresy, or apostasy: Ditch the newer BlackBerry OS too few developers believe in, and bet on Android devices to support BlackBerry's enterprise services.
The answer is probably the same as it is for Nokia: It's too late.