Will BlackBerry Beat The Street In Q1? I Think So

Apr.18.13 | About: BlackBerry Ltd. (BBRY)

When BlackBerry (NASDAQ:BBRY) released its profitable results last quarter, it indicated the outlook for the current quarter was breakeven. That no longer seems likely. Despite relative silence from BlackBerry on sales progress, the indicators suggest BlackBerry will have a profitable quarter.

On April 16, 2013 SeekingAlpha.com carried an article by Elephant Analytics estimating that BlackBerry needed to sell 3 million BB10 units in Q1 to achieve breakeven.

I agree with that estimate. The question is how many BB10 devices BlackBerry will sell in the quarter. I anticipate that they will sell between 3.5 million and 4.5 million BB10 devices.

Based on data from Google's Our Mobile Planet data base, there are several countries where BlackBerry has traditionally enjoyed a market share of at least 10%. I am not confident these data are current, but they do indicate the historic strongholds of the BlackBerry brand, and the areas where presumably they will have the most success rebuilding.

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As we know, BlackBerry released a March 13, 2013, statement disclosing that it had received an order for 1 million units from a single customer. Many believe the customer was a U.S. distributor in the United States that supplies Verizon (NYSE:VZ). Verizon holds about 31% of the U.S. market for cell phones. Assuming Verizon can sell these units and that the other U.S. carriers enjoy sales of BlackBerry devices more or less in line with Verizon, U.S. sales in the quarter will be somewhat greater than 1 million, and my guess is they could be as high as 2 million.

I have taken a shot at estimating how BlackBerry might fare in other markets as it progresses on its phased rollout of both its Z10 and Q10 phones. The Q10 is available so late in the quarter that I have not given much weight to its attraction in coming up with first quarter guesstimates. The Q1 numbers are generally less than the run rate for the year as a whole owing to the staggered roll out in different markets.

The table below sets out the estimated total world market for smartphones based on data released by IDC, and provides an estimate of BlackBerry sales by country based on a judgment about what its 2013 market share will look like.

Blackberry Unit Sales Estimate Q1 2013

Q1 Est. (Units)

Market

2013 Market Size

Blackberry share %

Implied units

Low

High

Mexico

16,000,000

26%

4,160,000

250,000

300,000

Indonesia

15,700,000

25%

3,925,000

350,000

500,000

Canada

4,500,000

23%

1,035,000

250,000

300,000

Argentina

7,000,000

18%

1,288,000

200,000

300,000

Middle East and Africa

39,000,000

16%

6,045,000

450,000

500,000

Brazil

28,900,000

12%

3,468,000

250,000

500,000

Europe (Spain, Germany, Italy, France, UK)

136,000,000

6%

8,160,000

1,200,000

1,500,000

Russia

18,800,000

3%

564,000

50,000

75,000

United States

137,500,000

3%

4,125,000

1,200,000

2,000,000

India

27,800,000

2%

556,000

50,000

100,000

China

301,200,000

2%

6,024,000

350,000

500,000

Japan

35,200,000

0%

-

-

-

All other

152,000,000

1%

760,000

75,000

150,000

918,600,000

40,110,000

4,675,000

6,725,000

Click to enlarge

Sources: IDC data for total market and the markets in China, USA, Japan, Brazil and India; Canalys data for Russia and Indonesia market size; and, guesswork for the other markets and market shares for 2013.

Based on the foregoing, Q1 total device sales for BlackBerry might be in the range of 4.7 million to 6.8 million devices, including both BB10 and BB7 devices. These data are estimates of consumers' purchases, not of BlackBerry shipments. For the first time, the mix of device sales is likely to be weighted towards the BB10 devices, which I believe will exceed 3.5 million units in the quarter, while BB7 devices will shrink to between 1.7 million and 2.7 million units.

Over the past several quarters, in anticipation of BB10, carriers have been reducing their inventories of BlackBerry devices. In Q1, I anticipate this trend to reverse, and carriers to begin to increase their stocks of both the Z10 and late in the quarter, the Q10 device. In my view, inventory restocking could add another 400,000 to 500,000 BB10 devices to BlackBerry's second quarter sales. Accordingly, I believe Q1 sales will be in the range of 5.1 to 7.2 million units.

If this is the case, the quarter should look somewhat like this:

Revenue Source

Units

ASP

Revenue

BB10 sales

3.5 to 4.5 million units

$500

$1.8 to $2.3 billion

BB7 sales

1.7 to 2.7 million units

$200

$0.3 to $0.5 billion

Playbook sales

350,000 to 450,000

$200

$0.1 billion

Subscribers

75,000,000

Service revenue

$800,000,000

$0.8 billion

TOTAL

$3.0 to $3.7 billion

Net income

$0.1 to $0.2 billion

Click to enlarge

The Street is looking for BlackBerry to post a small loss. Based on the success of the Z10 and BlackBerry's tight control over costs, I believe the company is likely to turn a profit in the quarter of between $100 million and $200 million, or about $0.19 to $0.38 per share.

The launch of the Q10, and of a number of new models yet to be announced, will determine whether BlackBerry continues its momentum and builds market share over the course of the year. At this point I am cautiously optimistic.

I am long BBRY.

Disclosure: I am long BBRY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am long not only Blackberry shares but also BBRY calls, and I am short BBRY puts.