Since the inaccurate report of Samsung making a bid for BlackBerry last week, the tech world has had BlackBerry’s hardware business in focus.
Many, like Mashable’s Christina Warren, believe BlackBerry should dump its handset division and focus more on software and services. Back in April of last year, I opined that the bottom line (money) would determine what would end up happening with BlackBerry’s hardware side.
A couple of months later, on June 19th, 2014, during BlackBerry’s Q1 FY 2015 earnings call, CEO John Chen confirmed this when he set a goal for its hardware business that still stands to this day:
“If we ship 10 million phones in a year, we’ll be profitable on phones.”
How well is BlackBerry doing in reaching this goal? Well, in the four quarters the company reported during the year (Q4 FY 2014 to Q3 FY 2015) it breaks down like this:
- Q4 FY 2014 December 1st, 2013 – March 1st, 2014: 1.3 million smartphones shipped
- Q1 FY 2015 March 2nd – May 31st, 2014: 1.6 million smartphones shipped.
- Q2 FY 2015 June 1st – August 30th, 2014: 2.1 million smartphones shipped.
- Q3 FY 2015 September 1st – November 29th, 2014: 2 million smartphones shipped.
These last four quarters, BlackBerry has shipped 7 million smartphones – about 3 million shy of the 10 million mark.
Now, if we want to give Chen the benefit of the doubt, and only count the number of devices shipped starting when he made his “10 million device/year” comment (a span of three quarters instead of four), the total stands at 5.7 million devices instead.
To meet the 10 million device goal during their fiscal year 2015, which ends on February 28th, BlackBerry will have to ship 4.3 million devices within that time frame. To put it in perspective, the last time BlackBerry shipped that many phones was the quarter that ended June 1st, 2013 (6.1 million devices shipped).
The 10 million device per year goal is important. According to Chen, it’s the mark that’s needed to not have the hardware business depending on other parts of the company to stay afloat.
If Chen and co. do not meet their own expectations, what should happen with the hardware business? Obviously, most of us want it to stick around, but should the total number of devices sold affect BlackBerry’s decision at all for 2015?
I suspect it won’t. BlackBerry is already planning to unveil part of its portfolio at Mobile World Congress in March, which will give us a glimpse at some new, concept devices. We also know, thanks to Chen, that sequels to the Passport and Classic are already being worked on now. Odds are we’ll get at least another full year of BlackBerry hardware before any solid decision gets made.
However, beyond that, can a sub-10 million devices per year division survive within BlackBerry?
BlackBerry is expecting to double their software revenue this year. If the hardware division is unable to be profitable on its own, will profit-loving Chen keep it around?
There’s no doubt the restructuring Chen has made with the smartphone division – think the Foxconn deal – has helped keep cost and margins down. This, in turn, has given BlackBerry’s hardware side some breathing room to work. Maybe, in 2015 BlackBerry can keep pushing these numbers and not need to sell 10 million devices a year. Perhaps, they can keep pumping out phones with the 7 million target goal instead.
One thing is for sure, it’ll be an interesting conversation going forward for John Chen and BlackBerry. Chen doesn’t want to let go of the phone division. Any technology lover out there – regardless of what OS you prefer – shouldn’t want BlackBerry devices to disappear either. The more options, the better.