BlackBerry CEO John Chen sees corporate recovery ahead

For the better part of 2015, the BlackBerry Priv has been in Android news headlines. Originally known by the working name “Venice” the device – before it was even confirmed – was already the stuff of mobile marvel and mystery. It was the first Android handset by one of the industry’s most prolific companies. It was a curved AMOLED device from a company other than Samsung or LG. And it was a slider with a full physical keyboard in a time when time itself had seemingly forgotten the form factor still existed. The latest news? It may be part of a potential panacea.

Speaking with investors earlier today, CEO John Chen not only highlighted the praise reviewers have showered on his company’s new product, but also explained that – due to strategic device strategy – the company is now on the verge of reversing the very hardware-related losses that once sought to spell doom for the the formerly dominant OEM’s future.

The optimistic news came amid BlackBerry’s Q3 earnings call, with the CEO stating that:

My first goal is to get us into a break-even position with the device business, because you really couldn’t do anything strategically with a business that continues to lose money…We’re in that ballpark now.

Thanks in part to revenue from the acquisition of a software company announced back in September, BlackBerry was able to cut non-GAAP losses to $15 million during the company’s third fiscal quarter. This in turn, resulted in a loss of 3 cents per share, as opposed to the estimate Wall Street had been predicting: 14 cents per share. Revenue was up at $557 million, well beyond the $489 million analysts had anticipated.

With respect to total unit sales, BlackBerry reported sales of approximately 700,000 units, however it is noticeably less than the 900,000 units that some analysts had been expecting. It should be noted that at launch, AT&T was the sole carrier offering the device in the USA, and it has yet to be released in many markets around the world.

Mr. Chen explained that in switching to Android, a cost-savings break has been added to the equation of Priv production, “because we don’t have to do everything ourselves in the operating system world.”

At the time of publication, BlackBerry stock was up 10.38%, to $8.61 per share.

The story of success

While sales shy of even one million units might seem small to some in light of HUAWEI’s recent announcement of 100 million devices shipped in 2015, or any random Samsung quarterly earnings call, it actually means a great deal to BlackBerry. Last quarter the Canadian OEM indicated it had only managed to sell around 800,000 units of its BB10-based handsets. While this means sales actually further declined from Q2 to Q3, should the Priv take off, these numbers could increase when it comes time for Q4 results.

It is also important to note that the Priv is also a very expensive phone, typically retailing for around $700, whereas the average sale price of hardware last quarter was just $240. BlackBerry therefore stands to make much more on each Priv sold than it would have in the recent past, especially in light of John Chen’s comments about lower production costs.

Indeed the company’s fortunes seem to be looking up, a dramatic change compared with the somewhat sullen story the company was suggesting just months ago: Just prior to the Priv’s release, Mr. Chen had indicated it might be his company’s last hardware offering were it not to have performed well in the market. Now there is ample opportunity for more to come.

Common sense or logical lag?

While many the world over had been incredulous at BlackBerry’s insistence on remaining true to its origins instead of embracing Android years ago, the switch to Android itself was not necessarily the “common sense” impulse it was often labeled as. The OEM employees individuals who are specifically tasked with creating BB10 hardware and software. CEO Chen has indicated future development of BB10 is essentially finished, with the company now having switched gears to Android. This means not only potential job losses, but – for some – a betrayal of the very values and origins of the company itself.

In many ways, BlackBerry’s slow transition is a North American parallel to that which Europe’s OEM darling, Nokia, has also had to deal with. With its Symbian OS having severely declined over the years due to falling sales, Nokia opted to align itself with Microsoft, a decision many felt was a poor one. When it was later announced that Microsoft planned to purchase Nokia’s device division entirely, many claimed its then-CEO, Steven Elop, was a planted trojan horse.

Since his appointment in November 2013, BlackBerry’s CEO has made it a priority to reduce costs and get the company in a favorable market position. He took the reigns after the company’s co-founders were frequently criticized as running it into the ground.

Wrap Up

With an optimistic view of the future, it looks as if BlackBerry’s immediate situation is safe. The question becomes what will happen next. Future success largely depends on the release of dynamic hardware that sets the company apart from its competitors. Samsung, for example, has won approval for government-related contracts. Privacy and security in and of themselves are now larger priorities for many OEMs, not just BlackBerry.

There is also equal concern in the hardware itself. Some have already asked just how relevant a narrow physical keyboard (as opposed to that of the BlackBerry Passport) is on a smartphone in this day and age. Likewise, Android users have – arguably – long since grown accustomed to virtual keyboards. While BlackBerry could rest solely on its existing user base, in order to make a genuine recovery and move beyond, it will be necessary to win more people over.

That the Priv lacks a fingerprint sensor, that it opted for a Snapdragon 808 SoC instead of the 810, that it won’t get Marshmallow until next year, and that it has released just months before next year’s heavy hitting flagships are gearing up for launch are all valid criticisms of the hardware handset. The high price is also a debatable, resistant factor.

We are eager to hear your thoughts on this story. Does 700,000 units sold make BlackBerry’s success solidified? Would you expect more? Less? How do you think it will perform next quarter? Leave us your comments below!