BlackBerry Prolongs Its Day of Reckoning

Rick Newman
Senior Columnist

To bastardize Mark Twain, the revival of BlackBerry has been greatly exaggerated.

The troubled smartphone maker notched a small win with its latest quarterly earnings report, announcing a modest profit of $98 million. Analysts had been expecting a loss, which is why the earnings news boosted the stock price by about 3 percent.

BlackBerry clearly isn't dead yet. Its new BlackBerry 10 smartphone, which will come in several varieties, has earned good reviews, and the company said it sold a million units in the first month the device went on sale. Most of those sales were in a handful of overseas markets, where BlackBerry's devices have remained more popular than they are in the United States.

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But the once-hot Canadian company still faces severe challenges, and even its CEO, Thorsten Heins, acknowledges BlackBerry may eventually need to find a buyer, unable to go it alone. The Z10 touch-screen phone that's just going on sale in the United States must win back at least some of the customers lost in recent years to Apple and Android phones. And the Q10, which features BlackBerry's popular physical keyboard and goes on sale later this spring, must turn out to be a complement to the Z10 rather than a competitor that cannibalizes BlackBerry's own sales.

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Even if BlackBerry were to build a killer phone, it still requires a helping hand from wireless carriers such as AT&T and Verizon.

"There's still room for BlackBerry in the smartphone market," says Carolina Milanesi of technology-research firm Gartner. "The first thing to watch will be the amount of advertising carriers put behind it, and how much support BlackBerry gets from the carriers. A lot of work still needs to be done."

BlackBerry also needs to persuade developers to write new apps for the BB10, which is possibly the biggest disadvantage BlackBerry faces compared with Apple and Android devices. Above all, the company needs to reestablish a cool factor, something that's extremely hard to do once a company has drifted down to also-ran status.

Despite the recent profit, there are discouraging signs. BlackBerry's subscriber base fell during the recent quarter form 79 million users to 76 million, a bigger drop than many analysts anticipated.

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"We expect the company to continue to lose subscribers lured away by the iPhone 5 and Galaxy SIII," Standard & Poor's said in its latest report on BlackBerry. "Also, we believe the high price of the BB10 devices will make them a difficult sell in emerging markets, where BlackBerry has had a big impact in recent years with its less expensive handsets."

Some stock analysts think a recent run-up in the company's shares--which have risen 26 percent since the start of the year, as the company has finally executed the launch of its much-awaited BB10 devices--could be a high-water mark. Analysts polled by S&P Capital IQ expect BlackBerry to lose money through 2016, which is as far into the future as such forecasts go. As Apple itself has proven, anything can happen in the hot market for smartphones, so BlackBerry could still bust a move that makes it a player once again. The question is whether anybody will notice.

Rick Newman's latest book is Rebounders: How Winners Pivot From Setback to Success. Follow him on Twitter: @rickjnewman.

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