BlackBerry Q4 profits raise hopes for survival

The launch parties are more or less over, but Thorsten Heins can’t stop celebrating.

BlackBerry’s fourth quarter earnings call Thursday morning will no doubt receive mixed reviews from analysts, but there’s no question Heins has achieved a remarkable turnaround in a short period of time.

Let’s put aside the one million Z10 devices that have been shipped over the quarter and the fact that an operating loss this time last year has been turned into a surprising, if modest, profit. The fact that the former Research In Motion is still standing, rather than being sold off in parts, with mounds of attention poured on its latest products by analysts and observers, would have been victory enough.

“Here we are, three quarters later,” Heins crowed on the conference call. “To say it was a challenge to deliver improved financial results would be the understatement of the year.”

There is a difference, of course, between winning short-term battles and riding out a long-term war in the smartphone space. That’s when the details of BlackBerry’s recent financial triumph need to be examined more carefully. Although sales look good, a lot of its success is owed more to an aggressive cost-cutting and effectiveness program Heins has been ramming through in parallel with BB10 development. This includes reducing manufacturing sites from 10 to four and outsourcing global repair operations, among other things. By saving as much money as possible, BlackBerry’s results with the Z10 look even better. It was certainly what Heins emphasized to take some of the sting out of an estimated loss of three million subscribers, from 79 to 76 million.

“We’re seeing a new attitude and a cultural shift in the company where we continually look at how to do things faster and more efficiency,” said Heins, echoing legions of downsizing CEOs everywhere.

It wasn’t enough to impress Edward Jones analyst Bill Kreher, who said the wildly fluctuating stock price was proof of how confused the market is over BlackBerry’s prospects. “We believe the outlook remains very uncertain, despite the encouraging profit,” he said. “The drop (in subscribers) was concerning, and if that becomes a trend, that high-margin business is certainly at risk.”

BlackBerry stock was volatile on Thursday after the market open. Shares rose 2.22 per cent to $14.89 on the Nasdaq.

Heins maintained that BlackBerry has several other options open beyond the devices themselves. He pointed to major service revenue opportunities in offering new security tools, enterprise device management software to enterprise users and possibly licensing the BB10 platform to third parties. Don’t count on it, said Kreher.

“BlackBerry’s longtime viability is dependent on the success of its products, not its service. If the products don’t’ sell, there won’t be any business,” he said flatly. “One million units is largely in line, but that is sell-in as opposed to sell-through ... reorder activity will be the real moment of truth.”

Here’s another truth: BlackBerry has gone from a company that was once so over-hyped its growth seemed unlimited to a legacy player that can get kudos primarily for meeting or surpassing extremely low expectations. That’s probably not the kind of transformation Heins had envisioned, but survival is a journey that involves many steps. Give the guy some credit for taking the first few without falling flat.