This morning BlackBerry reported the results of its first quarter results following the new launch of BlackBerry 10. In many ways this quarter has been viewed by most of us as the barometer against which to measure if BlackBerry will succeed in its hopes to recover and forge sustainable sales, revenue - and profitability - for itself. Which way does the barometer point?
Unfortunately neither up nor down. The quarter was essentially a disappointment, though it is hardly a reason to give up on the company yet. As we'll detail below, the company reported a loss (based on all things with issues concerning Venezuela). As a result of the loss, its stock price (BBRY on NasdaqGS) has been hammered as a result of the quarter's details - it is currently hovering around $10.80 (down around $3.65 from yesterday's close of $14.48), but we suspect it will probably recover those losses.
The five previous quarters resulted in falling shipments this quarter, however saw a rise to 6.8 million units sold worldwide. This is the first time that BlackBerry’s position has strengthened in a while. This represents a 13 percent increase from the previous quarter. It is estimated that 40 percent of this total was BlackBerry 10 devices. That would mean that around 2.7 million Z10 and Q10 devices have been sold globally. But it seems that the Bold 9900 is still the most popular model.
BlackBerry reported a revenue increase of 15 percent. This is up from last quarter’s $2.7 billion to $3.1 billion for Q1 2014. It is interesting that U.S. revenue is going up and sort of balancing out compared to other regions. North American revenue grew 30 percent.
While other areas showed an increase, Latin America had a revenue decline of six percent. According to BlackBerry’s CFO, Brian Bidulka, this was due to the fact that Venezuela foreign currency restrictions negatively impacted $72 million of service revenue recognition. This has a negative impact of two percent. Bidulka estimated that if Venezuela had been included, BlackBerry would have broken even for Q1 2014.
The bottom line result is that while revenue increased to $3.1 billion, there was an operating loss of $84 million. This caused BlackBerry’s share price to drop by over 19 percent this morning. CEO Thorsten Heins made it clear that BlackBerry was expecting to have a loss this year.
The breakdown is that as of June 1, 2013 the total of cash, cash equivalents and short-term and long-term investments was $3.1 billion. This is compared to $2.9 billion at the end of the previous quarter, an increase of approximately $200 million from the prior quarter. Cash flow from operations in the first quarter was approximately $630 million. Uses of cash included intangible asset additions of approximately $335 million and capital expenditures of approximately $84 million.
During this morning’s conference call, Heins reiterated several times that this was a launch year. A lot of money went into marketing, advertising and development, and as such, it was not a surprise that there would be a loss for the first quarter. He called the five month old platform a promising start for BlackBerry’s rebirth.
Heins said "During the first quarter, we continued to focus our efforts on the global roll out of the BlackBerry 10 platform. We are still in the early stages of this launch, but already, the BlackBerry 10 platform and BlackBerry Enterprise Service 10 are proving themselves to customers to be very secure, flexible and dynamic mobile computing solutions. Over the next three quarters, we will be increasing our investments to support the roll out of new products and services, and to demonstrate that BlackBerry has established itself as a leading and vibrant player in next generation mobile computing solutions for both consumer and enterprise customers."
Heins also made it clear this morning that BlackBerry was not a device-only company. A lot of focus has gone into the development BBM Channels and BES 10. BlackBerry appears to be focused on Enterprise Mobility Services. Heins believes that BES 10 is the most comprehensive mobile solution for businesses.
Earlier this week, BlackBerry announced the launch of a new BES 10 feature, Secure Work Space. This allows BlackBerry to bring its Balance feature to Android and iOS devices. Balance is the feature that allows you to have both a personal and a work profile on one device.
The successful adoption of BES 10 is seen as a driving force. As of now, 60 percent of Fortune 500 companies have downloaded, tested, or installed BES 10. This past month alone saw a jump of 6,000 installations. Between the launch in January and May there were 12,000 installations, and as of today there are 18,000 BES 10 servers installed.
There is definitely an emphasis to focus more on services than to just product more phones. Heins said that this was a marathon. They are not in it for the short term results of getting a lot of products out. Although BlackBerry would continue to produce several new devices every year, he mentioned that the three main initiatives that will receive the main focus are cross platform, BES 10 and BBM Channels.
The word that Heins used was that there would be a “plethora” of new products coming out, but BlackBerry will not sacrifice long term numbers for short term profits. With that said, there is the expectation that Q2 will also be a losing quarter. However, with the emphasis being more on mobile enterprise services, BlackBerry could very well win back its enterprise customers that have been looking elsewhere.
Edited by
Blaise McNamee 
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