On October 31, 2012, Apple (NASDAQ:AAPL) released an annual report for its fiscal year ended September 29, 2012. In 2012, the Apple iPad accounted for $32.4 billion of the company's $156.5 billion in total net sales. These top line figures were the result of Apple shipping 58.3 million iPad units during its 2012 fiscal year. In terms of unit sales, the iPad platform generated respective 334% and 80% year-over-year hyper-growth through the 2011 and 2012 fiscal years. At the time of this 2012 annual report, of course, Apple was still a Wall Street darling that traded for $600 per share and carried $560 billion worth of market capitalization. Certainly, BlackBerry (NASDAQ:BBRY) executives and engineers analyzed historical Apple financial statements with rose-colored lenses of bringing their own brand back to life.
On January 30, 2013, BlackBerry brought its BlackBerry 10 operating system to market. The BlackBerry 10 operating system was to emerge as the backbone supporting a new collection of smart phones, applications, and of course, tablets. In several circles, the BlackBerry 10 movement was analyzed as a last ditch effort to keep this company out of bankruptcy court. Earlier this year, Joshua Sherman and Digital Trends went so far as to describe the situation at BlackBerry as an "apocalypse." Recent data has indicated that the BlackBerry Playbook was a complete non-factor, in terms of altering the dynamics of the tablet market. The statistics, however, were merely a symptom of terminal illness. BlackBerry 10 failed - and the business model at Waterloo is far along the road to bankruptcy.
BlackBerry Playbook Specifications
BlackBerry aggressively promoted the Bridge feature of its Playbook tablets. This Bridge program was designed to smooth transitions between BlackBerry 10 smart phones and the Playbook. Marketing materials showcased the Playbook as a jack-of-all trades machine for work and play. Built-in applications were engineered to help Playbook users check email, browse the Internet, and manage video conferencing. As a workstation, the Playbook - Documents To Go feature allowed for integration between Microsoft (NASDAQ:MSFT) Word, Excel, and Power Point software. The 7-inch LCD Playbook touch-screen was also built to display images at 1024 X 600 pixel resolution. The BlackBerry Playbook ultimately settled in at a $199 to $299 price point, after initially debuting at $499.
The numerous holes destroying BlackBerry Playbook value were obvious from the get-go. The BlackBerry brand was in direct competition with Microsoft Windows to establish itself as a viable third wheel alternative to the Google (NASDAQ:GOOG) Android - Apple iOS duopoly. As such, promoting the merit of a Playbook tablet running Office programs played right into the hands of Microsoft, which had recently launched its own Surface tablet. Despite starting off from ground zero, overzealous BlackBerry executives initially priced this Playbook machine near the premium price ranges of the Apple iPad and Samsung Galaxy Tab. For the sake of comparison, the Apple iPad with Retina display was engineered to project graphics at 2048-by-1536-pixel resolution. The iPad has also served as a gateway to the popular iPhone, iMac, and iPod platforms, alongside roughly 375,000 applications that worked to customize this tablet experience. All statistical data has confirmed that the Playbook launch event was a complete bust for BlackBerry.
The Tablet Competition
On August 5, 2013, research firm International Data Corporation (IDC) released its report summarizing worldwide tablet shipments for the second calendar quarter of 2013. IDC does acknowledge the sequential decline in sales volume for both the Apple iPad and tablet market at-large, when compared against Q1 2013. The IDC, however, blamed the recent decline in sales upon Apple's decision to postpone the release of the next generation of iPad tablets until the latter part of this year into the Holiday Season. To date, Apple would introduce its iPad upgrades during the second calendar quarter. According to Tom Mainelli, Research Director, IDC, "A new iPad launch always piques consumer interest in the tablet category and traditionally that has helped both Apple and its competitors." Unfortunately for BlackBerry shareholders, a quick review of the IDC data may reveal that Mainelli was only half-correct in his assessment. The anticipated iPad upgrade launch will do nothing to spark interest in a Playbook machine that has already been thoroughly rejected by consumers.
For calendar Q2 2013, BlackBerry did not make the cut as a top-five tablet vendor in terms of units sold. As an operating system, BlackBerry powered a mere 100,000 tablet devices during this latest quarter. These results were actually significantly down from the year-over-year period, when the BlackBerry operating system tallied 200,000 shipments. For the sake of comparison, Google's Android and Apple iOS powered a respective 28.2 million and 14.6 million tablets. Taken together, the Google Android and Apple iOS duopoly controlled 95% of the tablet market. Although Microsoft Windows posted 527% year-over-year growth, it is still very much a laggard in this winner-take-all technology space. The Windows operating system maintained a 2% market share during calendar Q2 2013. Again, the BlackBerry operating system was a non-factor, as it laid claim to only one-tenth of one percent of the tablet market.
On August 5, 2013, Jeff Bezos, Amazon (NASDAQ:AMZN) founder and CEO, announced plans to purchase The Washington Post (WPO) for $250 million. Going forward, this deal will open up new avenues for the cross selling of product throughout Amazon. To date, Amazon has effectively priced its Kindle at cost, in order to sell high-margin goods, services, and content through this tablet. Amazon Kindle price points have begun as low as $69. As a standalone e-reader, future installments of the BlackBerry Playbook cannot compete against this value out of Amazon. BlackBerry is now fighting a losing war on two fronts at both the premium and bargain bin levels of the tablet market. Prospective technology investors should therefore reason that BlackBerry Playbook tablet sales would continue to stagnate into the second half of this year.
The Bottom Line
On August 7, 2013, research firm comScore released its report summarizing June 2013 U.S. smartphone subscriber market share. Again, BlackBerry remained buried beneath the Google Android - Apple iOS duopoly. BlackBerry operating systems, on average, powered only 4.4% of all U.S. smart phone subscriptions between March 2013 and June 2013. The BlackBerry 10 launch has failed miserably in all arenas. Investors should now evaluate the prospects of either the acquisition or break-up of BlackBerry. The Wall Street Journal recently reported that Microsoft was in "advanced talks" to purchase partner Nokia (NYSE:NOK). The deal allegedly broke down after Microsoft refused to pay a significant premium above Nokia's then $15 billion market capitalization. Last year, BlackBerry executives announced that this company was also up for "strategic review." To date, there have been no takers.
BlackBerry investors should sell off the stock immediately to avoid further losses prior to what may be the inevitable corporate bankruptcy. On June 28, 2013, BlackBerry released its first quarter fiscal 2014 results, for period ended June 1, 2013. The report listed 6.8 million smart phone sales as a Q1 2014 highlight, without making any mention of Playbook tablet sales performance. Still, BlackBerry posted a net loss of $84 million upon $3 billion in revenue during this latest quarter. Wall Street was not impressed, as traders dumped BlackBerry stock to a 28% loss to $10.46 within the immediate hours following the release of this financial report.
BlackBerry closed out its latest quarter with $13 billion in assets and $3.7 billion worth of liabilities over top of 524.2 million common shares outstanding on the balance sheet. These positions break down further to $9.3 billion in shareholder equity, or $17.75 per share worth of intangible book value. BlackBerry has listed $3.5 billion in intangible assets, $2.2 billion in property, plant, and equipment, and $887 million in inventory, as assets. In theory, these positions will be written down towards zero, if they cannot be effectively leveraged to turn a profit. Be advised that BlackBerry operated with a mere $3.6 billion, or $6.87 per share, worth of tangible book value, after subtracting out $5.7 billion worth of intangible assets and property, plant, and equipment from the asset side of the equation.
BlackBerry stock is still overvalued and is a strong sell.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.