Cash cows confront the fiscal cliff.
Blackberry surprised the financial community by reporting a profit of 22 cents a share for its fiscal quarter that ended earlier this month. Expectations were for a loss of about that size, not a gain.
It certainly is good news for Blackberry. It looks more like the result of tighter management than anything else, but there’s nothing wrong with that. So long as market success follows.
The big problem is in the subscriber numbers, which fell by about 3 million. A healthy company doesn’t show a net loss of customers in a market that’s growing at better than 40% per year. It’s particularly worrisome when losses come from the consumer market, which is increasingly driving the enterprise side of the business.
Blackberry’s hope is the new Z10 smart phone that launched in the U.S. last week. A million units have shipped so far. But from 2011 to 2012, Blackberry’s global market share was cut in half, dropping below 5%. It needs to add 30 to 40 million net new subscribers just to maintain market share – the Z10 needs to do more than just offset customer losses. Even at nominal churn levels Blackberry needs 50 million or more new subscribers total this year. A tall order for a company with 76 million subscribers worldwide.
The likelier course is that Blackberry’s market share will continue to drop, putting it in the same league with Windows and various flavors of Linux. That doesn’t necessarily mean Blackberry is doomed, but at best it relegates the company to a cash cow role – maximizing profits from a relatively stable customer base. Blackberry can’t just manage its way out of the slide. It needs to work magic with the Z10.