BlackBerry 7 device sales are on the decline. There’s no denying that. Those devices are being cannibalized by BlackBerry 10. However, with launching new devices comes higher operating costs.
According to Elephant Analytics on Seeking Alpha, they claim BlackBerry’s SG&A is expected to increase by 50%, from $523 million to $784.5 million.
They’re also speculating that amortization and R&D expenses will stay relatively the same as Q4 FY13 levels. This would put BlackBerry’s total operating expenses at $1.348 Billion.
What would BlackBerry’s hardware gross margin need to be for a breakeven in Q1 FY14? Elephant Analytics estimates a breakeven would need $512 million in hardware gross margins.
Apparently, BlackBerry 10 devices have made it possible for the company to make margins off of hardware sales. In order to achieve the projected hardware margins for breakeven, an estimated sale of 3.03 Million BlackBerry 10 devices are needed.
Here’s the full breakdown of the amount of all BlackBerry devices needed for reaching the estimated hardware margin:
|Type of Phone||BB7||BB10||PlayBook||Total|
|Devices Shipped (Million)||5||3||0.2||8.2|
|ASP Per Device||$230.87||$436.65||$132.00||$265.17|
|Cost of Sales Per Device||$220.40||$282.64||$165.44||$197.33|
|Hardware Cost of Sales||$1,102.00||$847.92||$33.09||$1,983.01|
|Gross Margin ($ Million)||$52.35||$462.03||($6.69)||$507.69|
If sales can exceed these estimates and hit 5 Million units sold, it’s said to expect a profit of $0.43 per share. This is actually all quite possible.
If the BlackBerry Q10 can reach even just a 60% success rate as the Z10, the device could account for 600,000 units shipped by Q1 FY14. Therefore, needing only an estimated 2.4 Million BlackBerry Z10 shipments by Q1 FY14 for a breakeven. Think it’s possible?