Where does BlackBerry go from here? Earnings report may point the way

TORONTO – Sales figures for the new BlackBerry smartphone have been a mystery since the device launched nearly two months ago, but the veil will be lifted on Thursday when the company reports its fourth-quarter results.

But the picture that will emerge for BlackBerry sales is only part of the whole story, which several analysts caution could still take another quarter to completely materialize.

“Buyers beware it is too early to gage sell-through,” wrote National Bank analyst Kris Thompson in a note to investors on Tuesday.

Since its last quarterly report, the company held a splashy launch in New York for its new phones, changed its name from to BlackBerry and rolled out the Z10 touchscreen smartphone in several key markets around the world.

The fourth-quarter results will serve as a good sense of how that initial rollout went, and what to expect this year from the company formerly called Research In Motion, as it works to regain a position in the ever-changing smartphone industry.

In recent weeks, analysts have relied almost exclusively on contact with mobile phone retailers to determine whether the BlackBerry Z10 has been a sales hit or miss. The anecdotal evidence has proven mixed at best, with some relaying that stores were sold out in the U.K., while others said they couldn’t find signs that stock was depleted.

Then there were questions about the number of phones each store received, leading to further confusion over how to qualify a murky product launch that may have stocked some stores with as few as two or three devices.

BlackBerry has labelled the Canadian and U.K. launches a success, noting that devices were sold at a faster clip than previous models, though it has declined to provide sales figures.

For analysts, the focus on Thursday will be where the company goes from here.

“We believe the real moment of truth will be the next quarter when the company has a full quarter of (the new phone) under its belt,” said Bill Kreher, a technology analyst with financial services firm Edward Jones in an interview.

“What will be very important is the company’s outlook for the upcoming 90 days.”

During that period, the company is expected to release a version with a physical keyboard, which could attract longtime BlackBerry users who shy away from touchscreen devices. A release date hasn’t been announced yet, though Canadians are likely to get the phone in April.

When the Waterloo, Ont.-based company reports its fourth-quarter earnings on early Thursday before markets open, analysts expect a fourth-quarter adjusted loss of 29 cents per share. Revenue is targeted at US$2.84 billion, according to a poll of analysts by Thomson Reuters.

Nearly as important will be BlackBerry subscriber numbers, which analysts consider a revealing figure into the popularity of the devices and a window into future revenue potential. The company receives monthly service revenue from each of it smartphone users.

In the third quarter, the company’s subscriber base slipped by one million to 79 million from the previous quarter, and expectations have been for a further erosion as more users retired their older BlackBerry models over the holiday season.

“It is critical for the company to maintain that subscriber base as it transitions from legacy products to BB10,” said Kreher.

Also on the radar will be how much cash the company still has in its coffers after paying for the phone launch and related marketing expenses. BlackBerry has managed to keep a solid cash position of nearly $3 billion over the past year as it prepared the delayed models.

Chief executive Thorsten Heins told the Australian Financial Review last week that he will report a “pretty good cash position” for the quarter.

Analysts will also look for comments from Heins on the U.S. launch, which started last week at AT&T. Several analysts have characterized it as lacklustre to moderately impressive, with some criticizing the lack of marketing dollars put behind the U.S. launch and poor placement in stores.

On Monday, Goldman Sachs trimmed in its expectations for the success for the new devices in the U.S. to a 20 per cent probability from 30 per cent.

“Despite the product itself being relatively well received by sales associates and online reviews, sell-through at most locations was less than 10 (units) per day, and in many it was as low as two to three per day,” Goldman Sachs analyst Simona Jankowski said in a note, which downgraded BlackBerry shares to “neutral” from “buy” at $17.

Cormark Securities analyst Richard Tse said that BlackBerry has the opportunity to surprise analysts with its quarterly results. He has a “buy” rating on the stock with a $20 target price.