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In an earlier article, I forecast that BlackBerry (NASDAQ:BBRY) would beat the Street in Q1 based on a review of its likely sales in several key markets. Some time has passed and better but still incomplete data has surfaced on the reception of the Z10 and Q10 in those markets. I think the most important information has been the strength of the reception for the Q10 in the U.K. and Canada where most observers report that it outsold the Z10.

I have tweaked my estimates of sales by country as a result, and now see sales of between 4.9 and 6.9 million units as set out in the table below. I expect sales to be somewhat better than I last forecast.

Blackberry Unit Sales Estimate Q1 2013

Q1 Est. (Units)

Market

2013 Market Size

Blackberry share %

Implied annual units

Low

High

Mexico

16,000,000

26%

4,160,000

275,000

325,000

Indonesia

15,700,000

25%

1 ,925,000

350,000

500,000

Canada

4,500,000

23%

1,035,000

350,000

450,000

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

275,000

500,000

Europe (Spain, Germany, Italy, France, U.K.)

136,000,000

6%

8,160,000

1,200,000

1,500,000

Russia

18,800,000

3%

564,000

75,000

100,000

United States

137,500,000

3%

4,125,000

1,250,000

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

4,900,000

6,925,000

I expect the BB10 devices to comprise 2 to 4 million of these sales at an average selling price of about $550 and the balance to be BB7 units at an average selling price of $275. Device sales for the quarter should fall in the range of $1.9 billion and $3.6 billion. Average margins were 40% last quarter and this is a richer mix, so I think it is safe to use 40% as the margin rate once again. Device margins thus should fall between $760 million and $1.44 billion.

Services revenue should continue to be $900 million plus at 75% margin, so add another $675 million to margin. Advertising and promotion costs for the quarter were very likely in the $500 million range on top of normal Selling, General and Administration costs which run at about $1 billion per quarter.

Putting this all together, the quarter could show anywhere from near breakeven to a profit of $0.80 per share:

BlackBerry Q1 forecast

(millions)

Low

High

Revenue

Devices

$1,900

$3,600

Services

$900

$900

Total

$2,800

$4,500

Margin

$1,434

$2,097

SG&A

$1,000

$1,000

Advertising and promotion

$500

$500

EBIT

($66)

$597

Tax (29%)

($19)

$173

NET INCOME

($47)

$424

Earnings per share

Loss

$0.80

Thorsten Heins' guidance when BlackBerry reported 2012 results was for a breakeven first quarter, but it seems possible that BlackBerry will show a profit. Q2 will be more interesting - with the Q10 launched in the U.S. market and the Q5 launched in Europe and Asia. The Q5 is targeted at the younger users and is offered in three colors - black, white and red. It has the potential to be a hot seller since it combines the robust features of the BB10 operating system with a "cool" factor and a price point within the reach of millions of customers who otherwise would be in the market for an Android-based smartphone.

BLACKBERRY Q5


(Click to enlarge)

Ever the optimist and long BlackBerry calls, my bet is that the company will perform at the high end of the forecast range. If it is and the momentum continues, expect BlackBerry stock to follow suit.

Source: BlackBerry Should Turn A Profit This Quarter