Ok, so it’s been some hours since the earnings call as I write and with these things I usually feel it’s better to sit tight and wait and see just how the numbers look once digested. Pretty much everyone agrees with the main themes but I think many who don’t follow the BlackBerry story as closely as we do in BlackBerry land (or those who may have their own agendas) might get the wrong end of the stick. Anyway, here’s my take.
Let’s start with people on the outside. A quick Google on the word ‘Blackberry’ here in the UK gave me my top 3 searches right now as:
When you read these articles they are snapshots. Yesterdays news today. So it would be wise to concentrate on those looking at the long haul, rather than grabbing a quick dig. But these 3 are a good representation of what is being said out there, that expenses have been cut but that revenue has fallen.
Now, the truth is that the turnaround is well under way and going faster than expected.
Remember, the annual period includes the disastrous ‘takeover months’ which saw the company virtually go into hibernation whilst the mobile tech world gleefully wrote them off and BlackBerry’s enemies joyfully began to pick over the bones of the ‘dead’ company. When you think back to the appalling launch of the Z30 and then look at the situation today, you begin to appreciate just how fast things are actually turning.
Business is actually a very simple game. You’re earnings figures (sales) have to be higher than your expenses (costs). When Chen took over this was not the case. When it is the case shareholders and the stock market are happy. Yes, there are balance sheet items which can muddy the waters somewhat but the very core of any company can be summed up right there. So don’t worry about chitter chatter, it’s what’s happening that affects the bottom line – that’s what makes the difference.
In just over a quarter John Chen says BlackBerry are already, in terms of cost cutting, about one quarter ahead of plan. This is highly significant. He believes this company can be effective on a lower cost base. Going forwards, if he is right (and I think he is), that means that you need to sell less to be profitable.
Simple, huh? Yes, but only if your organisation can generate sales (revenue) and that’s what these articles are now questioning. They’ve moved away from declaring the company ‘dead’ and are now cautiously saying ‘well, ok, not dead exactly but… there’s no revenue! This turnaround is impossible!’
Well, the problem is that to generate mega sales you need to advertise. And that costs money. Many people argue in life that ‘word of mouth is the most cost effective advertising’ and, of course, it is. The problem is word of mouth doesn’t reach enough people. Not by a long chalk.
So, what do you do in this situation?
Well, you do what John Chen is doing. Right now BlackBerry takes any low cost sales it can get on the device side driven by us, the fans and BlackBerry employees on the ground. The word of mouth. And that’s it whilst the expenses side of the business is set straight. Why? Because due to the cash in the bank he has time.
Then you go for ‘low hanging fruit’ as they call it in the business world. Easy wins at low risk. That’s what the Foxconn Z3 launch in Indonesia was about. That’s why they are concentrating so much on enterprise. That’s why BBM X-Platform was a no brainer. Why, at this point, burn the rest of your cash attempting to change the world in one last brief advertising hurrah for BB10? They don’t have the time to wait for the results.
BUT, there’s a back up plan in case cost cutting goes better than expected, which is, I believe, why you are now seeing the announcement of the Q20, more Bold development and the expansion of the Z3 to LTE and therefore worldwide. These can be baby stepped out, at low risk and very profitably. With price points already tested, to great success where launched, with the Z10 and Q5 offers.
Whilst all the while they continue on with the Z50/Q30/whatever ‘flagship’ devices are coming next IN CONJUNCTION WITH the easy wins. These are long term devices that will come to the table as BlackBerry comes back to the fore. To do THAT, they need sales, now. So might as well do it the easy way and at the same time continue to develop BB10 making it what it already is, the best on the market. So when they CAN afford to market it again, it will be a no brainer for the customer, it will be that far ahead.
And all the while profitablility grows…
And when you look at it like that, it is ultimately REALLY STUPID to say BlackBerry is leaving hardware. It is actually the cornerstone for them for the future and their path back might be quicker than you think.
One last thing. Much is made by some elements of the media and BlackBerry haters of the amount of BB7 devices sold compared to BB10. In this financial report it is actually 2.3 million BB7 devices compared to 1.1 million BB10 devices. In my opinion this is not just to be expected but applauded.
Remember, in this quarter and right now there is NO advertising for BB10. None whatsoever. Zip. Zilch. And in many Western countries even if you want to buy a BB10 device you are either actively put off by retail staff or struggle to find one as many carriers don’t have the full range in stock. So those 1.1 million devices are the result of customers struggling through a brick wall of negativity just to get their hands on the best smartphones on the market.
And they’ve only got there because of the unceasing efforts of BlackBerry staff on the ground and YOU – the BlackBerry faithful, keeping the torch burning. 1.1 million BB10 devices sold this quarter because YOU kept the faith.
And you have no idea how valuable that has been.