While BlackBerry cancelled its Q2 2014 earnings call citing the letter of intent from Fairfax as the reason, it had to file a “management discussion and analysis” statement with the Canadian regulator discussing the quarter where it posted almost $1 billion in losses and giving an outlook. The filing paints a grim picture about the state of the company with declines across the board including hardware, services and other businesses. One of the key takeaways from the filing is that the decline of sales of BlackBerry smartphones is now not limited to the US and is now affecting some of its stronger markets in Asia Pacific too. Also Read - Blackberry 5G smartphone 2021 comeback confirmed again, to bring physical keyboardsAlso Read - Blackberry is coming back once more, will debut in 2021 with a flagship keyboard phone
“The Company has experienced a decline in demand for its products and in its overall market share. The intense competition impacting the Company s financial and operational results that previously affected demand in the United States market is now being experienced globally, including in international markets where the Company has historically experienced rapid growth,” BlackBerry said in the filing. Also Read - TCL will not design, manufacture or sell BlackBerry smartphones from August 31
BlackBerry attributed the decline to competition from high-end smartphones from other brands that affected sales of its high-end BB10 smartphones as well as lower-priced Android smartphones that attracted more buyers than its BB OS 7 smartphones with a bigger app catalogue.
“The increase in competition encountered by the Company in international markets is due to the recent entry into those markets of global competitors offering high end devices that compete with the Company s BlackBerry 10 devices, as well as other competitors targeting those markets with lower end Android-based devices that compete with the Company s lower cost devices. The decline can also be attributed to consumer preferences for devices with access to the broadest number of applications, such as those available in the iOS and Android environments,” it added.
As a result, BlackBerry’s smartphone shipments declined 50 percent year-on-year to just 3.7 million units. The smartphone vendor acknowledged that BB10 has not done as well as it had anticipated. The Z10, in particular, has received a price cut and is being re-tiered. BlackBerry took an inventory charge of $934 million mostly on unsold Z10 stocks.
Even the services business is declining. Its services revenue declined by $269 million or 27.1 percent year-on-year to $724 million. While $25 million of it is attributed to deferred payments from Venezuela, BlackBerry has acknowledged that the services business has been negatively impacted in the most recent quarter.
“The decrease in service revenue is primarily attributable to a lower number of BlackBerry users and lower revenue from those users compared to the second quarter of fiscal 2013, and the Q2 Venezuela Service Revenue Deferral. The decrease also resulted from a continued shift in the mix of the Company s customers from higher-tiered unlimited plans to prepaid and lower-tiered plans as well as pricing reduction programs implemented by the Company to maintain the customer base,” it said in the filing.
However, the trend should be bothering, especially with the new BB10 platform that does not mandate every user to pay BlackBerry a fee to access the Internet, BBM, email or other services. BlackBerry expects its services revenues would drop by a further 12 percent in the next quarter.
Even though BlackBerry is facing competition in the enterprise segment with the growing BYOD trend, where users have found its BB10 smartphones to be less attractive from its rival’s offerings, it is clear that BlackBerry has no option to pursue that and the prosumer segment. It is now too late in the day to pivot in the consumer space as BlackBerry just cannot compete with low-cost Android smartphones in the entry-level segment with its BB OS 7 smartphones and high-end smartphones from Apple and Android players that compete with its BB10 offerings.