BlackBerry Loyalists and Their Eccentricities Aren’t Enough to Save Handsets

Though Blackberry (BBRY) may have a die-hard fan base in love with the raised keyboard, extra security and overall feel of a BlackBerry device as compared to smart phone industry leaders like the Apple’s (AAPL) iPhone, those fans have not been enough to save the company from a precipitous decline.

Analysts expect that decline to continue Thursday when the company reports its first quarter financial results. If the Walterloo, Ontario based company doesn’t turn it around, it could be the end of the once-popular smartphone maker in hardware and an almost complete shift to software.

According to Reuters the consensus from analysts is that the company will post a loss in its first quarter of 2017 ended March 31 of $27 million, or seven cents per share, down from a net loss of $238 million its fourth quarter of 2016.

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Credit Suisse’s William Chu said he predicts the earnings will show the company’s continued “struggle” to compete. For the past few years, it has been a “cash-burn business,” he said.

BlackBerry’s financial decline began when companies like Apple and Samsung began developing products that were not only competitive in security software, BlackBerry’s longtime specialty, but also in design.

“When these other platforms were launched, security was pretty good … So when your main focus and main differentiation is security, it seems like what Apple has is probably good enough. That’s where they begin to struggle,” Chu said.

The loyalty for existing BlackBerry customers relies mostly on the necessity for hyper-security and protection — this means catering to people in business, national security and finance.

At the annual meeting on Wednesday morning, CEO John Chen told shareholders the company is interested in building the “best and most secure Android phone” that is profitable. He acknowledged that earnings in hardware are likely to fall 24% this year. BlackBerry’s software revenue could increase 30% for the 2017 fiscal year, Reuters added.

Chen also said the operation has cut costs in the manufacturing chain, making it more viable to only make three million annual shipments.

Chen recognized that declining interest in hardware has become a problem. The company, valued at $3.68 billion, reported a loss per share of 19 cents in the 2016 fiscal year, so its interests lie in updating software rather than in its devices. More information will be released Thursday morning in its first quarter earnings report.

BlackBerry’s latest phone, the Android device Priv, is supposedly struggling and facing a high rate of returns. In April, Chen said the company would consider ditching its hardware business by September if it couldn’t turn around large enough profits. He did note, however that the company is close to breaking even on sales.

“Devices must be profitable,” Chen said in an investor call Wednesday. “We’re trying to rebuild our brand and interest into our phones.”

Indeed, at least some would like to see the handset business live on.

To hold on to their phones and not make the switch to an Apple or Samsung device, some BlackBerry users are going so far as to coding their own devices to be compatible with apps like Snapchat that aren’t available on Amazon or BlackBerry World app store.

Blackberry shares closed down 4.40%, or 31 cents per share, to $6.74 Wednesday. The company traded up 2 cents after hours.

Source:https://www.thestreet.com/story/13616602/1/blackberry-loyalists-and-their-eccentricities-aren-t-enough-to-save-handsets.html

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