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Summary

  • BlackBerry has nearly completed phase 1 of the Z3 device rollout by entering 13 countries in South East Asia, the Middle East, and Africa.
  • These calculated deployments may lead to higher smartphone sales and higher revenue, bucking the previous trend.
  • An LTE version of the Z3 could set the new standard for BlackBerry's device releases in the US, UK, and Canada, and again show a trend reversal.
  • Going forward BlackBerry should make all future releases available on ShopBlackBerry.com upon product launch.

After reducing adjusted operating expenses by 57% year over year and 13% quarter over quarter, BlackBerry (NASDAQ:BBRY) is focusing on revenue growth. The non-recurring events like real estate sales, tax refunds, and settlement of prior accounts have bolstered the company's cash balance but investors need to see stable top line growth. To a small effect BBM is seeing growth with its Stickers and eBBM suite. The BBM Shop is packed with several sticker packages now and includes several packages specifically for certain regions. These packages are usually sold for $1.99. BBM Protected, the first solution in the eBBM Suite, was launched last June and licenses are available at $29.99 per user per year. With much of the company's enterprise software still being trialed for free it should be nice to see one of their features being monetized.

In my last article I stated that for the short term the handsets division will still be important to BlackBerry's return to profitability, while other business ventures continue to develop. Simply, this is because handsets have the greatest potential to deliver immediate and large revenue growth. In the latest earnings report we saw that BlackBerry's revenues stabilized and the contribution from hardware actually went up over the past quarter. In this current quarter BlackBerry released its new Z3 model in over 10 markets throughout South East Asia, the Middle East, and Africa. This is already more than I had expected and is a good sign. I created the table below to summarize this information and show what portion of this quarter the Z3 is available for.

#

Country/

Market

Launch Date

Availability Date

Launch Price

Approx Price [USD]

Available days in quarter

1

Indonesia

April-29-14

May-15-14

2,199,000 IDR

$189

92

2

India

June-25-14

July-02-14

Rs. 15,990

$265

61

3

Vietnam

June-18-14

July-04-14

4,590,000 VND

$217

59

4

Malaysia

June-24-14

July-07-14

699 MYR

$220

56

5

Hong Kong

July-03-14

July-08-14

HK$2,088

$269

55

6

UAE

June-25-14

July

Dh 899

$245

>31

7

Saudi Arabia

June-25-14

July

N/A

N/A

>31

8

South Africa

July-03-14

mid July

2999 ZAR

$281

>31

9

Qatar

June-25-14

by end summer

N/A

N/A

N/A

10

Bahrain

June-25-14

by end summer

N/A

N/A

N/A

11

Kuwait

June-25-14

by end summer

N/A

N/A

N/A

12

Nigeria

July 10-14

N/A

39,900 NGN

$246

N/A

13

Philippines

July 22-14

N/A

Php 10,990

$252

N/A

Note: Approximate prices as of July 20, 2014

Immediately, you can notice that there is only one country, Indonesia, in which the phone sells for under USD$200. I believe sales in Indonesia will continue to be very strong and the company definitely made the right call by starting with the rollout there. A report by research firm Nielsen showed that BlackBerry remains the strongest brand in Indonesia with 48% of smartphone users choosing BlackBerry as their top brand while 34% chose it as their favorite brand. Furthermore, the data showed that 79% of Indonesian smartphone users picked BlackBerry Messenger. BBM even received the Indonesia Cellular Award this year in the category of 'Best Mobile Chat App'.

Although the majority of markets have a retail price of over USD$200, I have omitted the numerous incentives provided by different carriers that bring the overall price down. And although you can compare the price from one region to another it is ultimately not that useful. What's more important is how the phone compares to competitors in its own market. Reviews of the Z3 have been good and its competitive pricing along with Android app support should lead to decent sales. BlackBerry really needs to get its phones out there and increase market share and these recent product launches could do just that.

Even with being launched in about 13 markets already, it would be good to see the Z3 continue being quickly rolled out into more regions. Moving west may be BlackBerry's next phase but it is not quite clear when that would happen. Launching the Z3 LTE in the US, UK, and Canada could be a positive surprise if done before the end of this quarter and before the release of the high-end Passport device. This sort of release would actually lay the foundation for the future BlackBerry devices in the developed markets. It's no secret that carrier relations have not been good and CEO John Chen needs to work on repairing this.

Alternatively, BlackBerry could make the LTE Z3 available on ShopBlackBerry.com upon first launch. The company made previous phones available through e-commerce about six months after initial release. The Z30 (BlackBerry's latest release prior to the Z3) was initially released in late September of last year then became available for sale online in March. Because the Z30 was exclusive to Verizon Wireless the phone's reach was limited and sales were not good. However, as the phone became available to customers in the US, UK, and Canada through the ShopBlackBerry website sales experienced an uptick. This does not come as a surprise at all as customers from other carriers could purchase the unlocked phone and stick with their carrier. That move merely opened the market up. BlackBerry should really make it the standard that when they release a phone it is also available unlocked for sale through their website. This could only lead to better sales.

Conclusion

BlackBerry's next earnings report will reflect the Z3 smartphone being available in five markets for at least eight weeks. I expect the number of smartphones sold this quarter to be larger than 2.6 million as BlackBerry phones become more widespread in South East Asia. Additionally, BlackBerry will release two more phones this year. With selling that many phones this quarter, the goal of breaking even on handsets by reaching the target of 10 million phones a year seems very achievable.

Disclosure: The author is long BBRY. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Source: BlackBerry Showing First Signs Of Serious Revenue Growth