Is BlackBerry on the Rebound?

It appears that BlackBerry (Nasdaq:BBRY), formerly known as Research in Motion, is finally seeing a turnaround. Cost control measures and a new product pipeline has steered BlackBerry’s stock performance upward. Furthermore, management is convinced that the recent quarter’s performance was not a “one-time effect” but rather is reflective of the “efficient engine” that has been established in the organization. I hope it is true, as I am keen to see more of a four-horse race then a two-horse race in the mobile device market.

BlackBerry’s Financials
BlackBerry’s Q4 revenues fell 36% over the year and 2% over the quarter to $2.7 billion, missing the Street’s targeted revenues of $2.82 billion. EPS for the quarter of $0.22 was significantly ahead of the loss of $0.31 per share projected by the market.

By geography, 45.8% of their revenues came from Europe, the Middle East, and African market where sales improved 6% over the quarter. The North American market brought in 26% revenues, with sales falling 9% sequentially. Latin America sales fell 10% to bring in 17.9%, and Asia Pacific revenues remained flat sequentially and contributed 14% of revenues for the quarter.

While sales and subscriber base continued to decline, BlackBerry reported impressive sales of their newer products, suggesting a possible rebound. They shipped six million BlackBerry devices, of which one million were on the new Z10. Their tablet sales also improved as they reported sales of 370,000 PlayBook tablets.

The market was concerned about the loss of three million subscribers during the quarter. BlackBerry ended the quarter with 76 million subscribers worldwide. This was the second consecutive quarterly decline in subscriber base. The silver lining to the declining consumer base remains that churn is driven by the subscribers of lower-end  products; these subscribers were not contributing  as much revenue and would not have switched to the higher-priced Z10 subscriber base. BlackBerry claims that the declining subscriber base is a consequence of the transition to their new platform and will slow soon.

BlackBerry’s Product Lineup
The much-awaited Z10 was released to rave reviews in markets across the world, and soon stores in France, Saudi Arabia, UAE, Kuwait, London, and Canada ran out of stock. Its launch got delayed in the U.S. as carriers waited to test the model before releasing it, but, since its launch, BlackBerry has seen strong traction in the U.S. market as well.

The biggest problem facing BlackBerry with regards to Z10 is that of the limited availability of apps. Research reveals that less than 10% of the 100 most popular Android apps and less than 5% of the most popular iPhone apps are available on BB10 OS. There are only 70,000 apps available for BB10 devices, compared with more than 700,000 for iOS-based devices, 650,000 for Android-based devices and 125,000 apps for Windows Phone. BlackBerry has been trying to counter the problem by making it more attractive for developers to build apps for their phones. Earlier, they launched a contest, giving away Playbooks and cash prizes to the top games that made it to the app store. They are also connecting with development teams and have held several developer-focused events in more than 40 countries, hosting nearly 10,000 developers to address concerns and continue to drive interest in app development for the platform. While 70,000 apps at the time of launch may sound too low compared with the number of apps available on other mobile OS, it is worth mentioning that the number is still significantly higher than the 50 apps that were initially available for Android at the time of its launch.

But, that isn’t stopping BlackBerry from going full force ahead. They are increasing marketing effort for the phone and soon week, U.S. smartphone users will see BB10 ads on iOS and Android devices. Besides increasing marketing effort, they are also expanding their phone selection. The consumers are now waiting to try out Q10, the equivalent of the Z10 version with a keyboard, which is due to release in April this year.

Some of the other product launches expected soon includes a new tablet offering with a widescreen option. The market is also waiting for BlackBerry’s phablet, a smaller form factor device which is also expected to include a built-in keyboard, unique feature in the tablet market.

In addition, they are continuing to leverage their older OS, the BlackBerry 7. They plan to use the OS to cater to establishing a strong base in emerging markets, including India, Indonesia and others where they already have a strong following. BlackBerry is working on releasing a new handset that will run on BB7 and will address the price-sensitive consumers in these markets.

The release of the new phone has been received well even by the stock market. Their stock is trading at $15.14 with a market capitalization of $7.93 billion. It touched a 52-week high of $18.32 in January 2012.