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9/26/2014
02:33 PM
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BlackBerry Sells 200,000 Passport Smartphones

BlackBerry's Passport sales show there's still a place for smartphones with keyboards, but they also show the company's modest ambitions.



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BlackBerry's Passport smartphone sold out online within hours, with total sales topping 200,000 units, said CEO John Chen Friday during the company's earnings call.

Launched Wednesday, the Passport features a physical keyboard and distinctive square screen. Analysts estimate BlackBerry accounted for as little as 0.5% of smartphone shipments during the most recent quarter, but company execs say the Passport will gain an enterprise following thanks to its unique, productivity-oriented features.

Though Chen spoke enthusiastically about the Passport numbers, they're open to multiple interpretations. The company said it sold only 2.4 million smartphones during its recently concluded second quarter, so it's impressive for the company to have sold one-twelfth that number of phones in fewer than three days. But Passport's sales also demonstrate how far the once-mighty company has scaled down its ambitions: 200,000 is a strong number relative to BlackBerry's miserable baseline, but not to the larger smartphone market, which just saw Apple sell 10 million iPhones in a single weekend.

Still, BlackBerry looks much more stable than it did in late 2013, when the company was stumbling through a multibillion-dollar quarterly loss. Chen took over in late November and has worked to improve margins by selling unnecessary assets and real estate, and emphasizing the company's software and services.

[Plenty of challenges remain as the beleaguered BlackBerry tries again. Read BlackBerry's Hardware Hail Mary: 4 Challenges.]

BlackBerry still isn't profitable, and when and if it gets there, revenue will pale in comparison to the company's past glories. Even so, Chen said the company could be in the black as soon as spring 2015 -- no small feat, considering the fiscal wreckage he took over.

BlackBerry's new Passport smartphone.
BlackBerry's new Passport smartphone.

Overall, the company reported a net loss of $207 million, or 39 cents per share, for the quarter, ended August 30. During the same quarter last year, the company lost nearly $1 billion. But revenue for the most recent quarter was only $916 million, off by more than a third from the year-ago period. The shrinking losses speak to the efficiencies Chen has instituted, but the company should be concerned if revenue keeps falling.

Adjusted for charges related to restructuring and other issues, the company's quarterly loss was only $11 million, or 2 cents per share.

Though the company's revenues continued to slide, Chen highlighted several encouraging signs. On the device front, the company has refocused on enterprise customers, and Chen claims large organizations, notably banks and government agencies, are signing up. But devices such as the Passport emphasize business to the detriment of apps and videos. It remains to be seen if the device sustains momentum now that iPhones and Android devices have conditioned so many users to mix work and play.

Company execs also said BlackBerry Enterprise Service 10 (BES 10) is attracting new customers, and that the company's low-end Z3 phone has been popular in emerging markets. Chen recently said his company is carefully controlling manufacturing and components costs, a claim that the earnings report supports; BlackBerry's hardware unit posted an adjusted profit for the first time in more than a year.

Still, the hardware unit has improved margins partly by reducing the number of devices it produces. Over time, BlackBerry plans to scale down devices even further and focus more on software and services. Chen even went so far as to state recently that the company would stop making smartphones if they aren't profitable. Given this software-oriented strategy, it's potentially troubling that almost half of BlackBerry's revenues came from hardware.

Even so, BlackBerry enjoyed growth across many of its services. The company said its EZ Pass program, which provides a free management platform for mobile devices, led to 3.4 million new BES 10 licenses. BlackBerry said 840,000 of these customers defected from MDM products. The company also reported 91 million monthly active users for its BBM messaging service. The quarter before, the company reported only 85 million active users.

If the world weren't changing, we might continue to view IT purely as a service organization, and ITSM might be the most important focus for IT leaders. But it's not, it isn't, and it won't be -- at least not in its present form. Get the Research: Beyond IT Service Management report today. (Free registration required.)

Michael Endler joined InformationWeek as an associate editor in 2012. He previously worked in talent representation in the entertainment industry, as a freelance copywriter and photojournalist, and as a teacher. Michael earned a BA in English from Stanford University in 2005 ... View Full Bio

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