BlackBerry reported financial results Friday for the three months and fiscal year ended February 29, 2016, generating $464 million in revenue, down 30% from last year and well below the $563 million expected by Wall Street. Software and services revenue rose 106% to $153 million. For the year, software and services brought in $527 million, and the quarter produced a non-GAAP loss of 3 cents a share. The bottom line net loss for the period was $238 million. The company still had $2.62 billion in cash and investments on the books at the end of the three-month period.
However, the figures were overshadowed by the continuing decline in hardware sales.
This was the first quarter to include a full quarter of BlackBerry Priv sales and it should have been the first to show an improvement in hardware sales. Instead of an expected increase, device sales have plummeted far more quickly than anticipated.
The company said it sold only 600,000 phones in its fiscal fourth quarter, which ended February 29. That’s less than half the 1.3 million handsets sold a year earlier and a 14% drop from last quarter’s minimal sales. That 600,000 thousand figure is a combination of BlackBerry Priv, BlackBerry 10 and BBOS device sales and predictably, the company did not reveal any breakdown of the embarrassing figures.
Analysts had anticipated the company’s new Priv model, which runs on Google’s Android operating system, would give sales a boost versus last quarter. BlackBerry CEO John Chen attributed the disappointing handset sales in part to slowing demand for high-end smartphones and that he wasn’t able to close negotiations with key carriers, including Verizon, in time to get broad distribution.
However, that argument falls a little flat when you consider that the BlackBerry Priv is currently available in 34 countries.
BlackBerry said it is considering a less expensive Android-based phone, but it will also face stiff competition in this mid-market segment, underscored by Apple’s move last month to launch a less expensive iPhone. There is also the simple fact that by the time BlackBerry consider releasing a mid-range smartphone, they will already have one – the BlackBerry Priv.
On a conference call with analysts, Chen pointed to rising software sales, which more than doubled to $153 million.
“Our overall Q4 performance was reasonably good,†Chen insisted during the call.
“We made progress on all our strategic priorities.â€Â
But with software still comprising less than a one-third of sales, the bottom line was that Blackberry took in only $464 million of revenue in the quarter, down 30% from a year ago and far below the average analyst estimate of $563 million. An adjusted net loss per share of three cents was slightly better than the 10-cent loss analysts anticipated.
BlackBerry Hardware
While it may not be a fair comparison, in it’s fourth quarter Apple sold a total of almost 75 million devices. That equates to almost 822,000 iPhones per day, which means that Apple can sell more phones per day than Blackberry can in a quarter.
After speaking to analysts, Chen went live on CNBC where he conceded he might have to dump the entire handset business if he couldn’t eliminate its losses by later in the year, as he has promised.
“If by September, I couldn’t find a way to get there, then I need to seriously consider being a software company only,†Chen said.
Let’s make no bones about it.  This is the kind of statement that literally puts off enterprises from currently buying BlackBerry smartphones.  In the enterprise, most contracts are in the 2 to 3 year range and John Chen constantly stating that if he can’t make a profit, then he will give up the phone hardware simply gives corporate customers no confidence in taking on 2 to 3 year contracts. He may as well just say, ‘Buy our phone, but if it doesn’t sell well, we’re out of the phone business and you’re on your own”.
In the UK obtaining the BlackBerry Priv in volume has been a nightmare, with many enterprise customers initially interested, complaining, and eventually purchasing other manufacturers devices. That has slowly changed with BlackBerry’s new direct sales initiative but that is still a slow and laborious process, compared to obtaining other devices.
Quite clearly the release of the first Android-powered smartphone by BlackBerry has not helped to reduce the decline in sales.  In fact, you could argue that if it wasn’t for Priv sales then total sales for the quarter would have been horrifically lower.
It is undeniably clear, the huge majority of users don’t want BlackBerry 10 and that literally “forced” BlackBerry to produce an Android phone. However, 600,000 sales highlights that the Priv has not been a success as that figure is a total comprising BlackBerry 10 devices, BBOS devices and the Android-based Priv. No matter which way you to attempt to spin it, those figures don’t lie.
However, I will take it a step further.  BlackBerry has a userbase comprising “diehards/fans/fanboys”, whatever you like to call them and they tend to buy every model of BlackBerry available unlike other device manufacturers “fans”.  Samsung “fans” don’t tend to go out and buy the Samsung S7 edge for example in black, then buy the gold, then buy an emerald green … and so on. As an example, BlackBerry “fans” will buy the Passport in black, then buy it in white, then buy it in red and then when BlackBerry rejig the shape a little, they will buy the Passport SE.  That example is one user who just bought four devices of practically the same model of smartphone, all contributing to BlackBerry’s sales figures (not just this quarter of course).
Consider the fact that there are hundreds of thousands of them, those figures all contribute to BlackBerry device sales and slightly skew the picture of overall sales versus users purchasing devices.
Why the switch to Android has not stopped the decline in hardware sales is a difficult question to answer.  The problem is that there are a whole load of possible answers to choose from.  Here is my top five:
- BlackBerry branding: The number one reason is that the Priv carries the BlackBerry logo.  I don’t think John Chen realised just how badly damaged the BlackBerry brand is when it comes to smartphones.
- Price: The Priv is ridiculously over-priced. While you may argue that the price was “fair” when it was released in November 2015, almost six months later it has not had a major reduction – and it needs one.
- Cost-cutting: There is too much about the Priv where BlackBerry’s cost-cutting focus can be seen.  For instance, in the UK we don’t have wireless charging, just so BlackBerry can save some money. The Priv supports fast charging but BlackBerry don’t include a fast charger, just the normal BlackBerry charger.  If you want to use the fast charging feature then you will need to buy yourself a fast charger.  That is unacceptable for the price BlackBerry are charging for the phone.
- Physical keyboard.  Now this is one area where users opinions definitely vary.  Personally, I never use the physical keyboard as it is just too damn small and I prefer an all-touch device as BlackBerry produce the best virtual keyboard software that exists for Android.  Not including the physical keyboard would have made the device a lot more appealable to modern smartphone users and vastly reduced the price of the device. This would also have made the device appeal to many current BlackBerry Z30 users, who have been screaming out for a new all-touch device from BlackBerry for far too long.
- Build quality: Some people think the build quality is amazing while others are not that easily impressed.
No doubt readers will have other ideas and it is guaranteed that someone will point out BlackBerry’s poor marketing is a top reason. If people don’t know about it, they can’t buy it. Another common reason given is the lack of a fingerprint reader.
There is one reason that stands out for me to buy the Priv right now and that is the fact that this device may just turn out to be a collectors piece in the near future.
BlackBerry Updates
The company also announced that the BlackBerry Priv will receive an update to Android 6.0 either at the end of this month or early May. That is for the unlocked version of the device. Those with a carrier branded model will have to wait for their wireless operator to approve it.
The current private beta of the Marshmallow update should also be made available as a public beta next week.
In addition, the BlackBerry 10.3.3 update, originally scheduled for BlackBerry 10 users last month, is now expected to roll-out in June. BlackBerry 10.3.4 will launch much later.
