BlackBerry (BBRY) surprised Wall Street with a small profit during the fourth quarter, and said that it has already shipped a million Z10 smartphones. The Z10 is BlackBerry’s new touchscreen phone based on its new BB 10 operating system. Although the new phone has just gone on sale in the United States, it was available in Canada, the United Kingdom and the United Arab Emirates during the last part of the fourth quarter. CEO Thorstein Heins estimated today that roughly two thirds of the million Z10 phones shipped have been sold to customers.
Heins said demand for the Z10 has been “better than expected” but that the company continues to find itself in a “challenging environment.” Nonetheless Canada’s struggling smartphone maker earned $94 million, or 18 cents a share, in the fourth quarter, compared to a loss of $118 million in the year-ago quarter. Analysts had expected a loss for the this quarter.
Revenue was $2.7 billion, down 36% from the year-ago quarter. BlackBerry also reported a drop in subscribers. After adding subscribers in the third quarter, the company lost 3 million in the fourth. BlackBerry ended Q4 with 76 million subscribers. But Heins noted that a significant portion of its Z10 buyers were switching to BlackBerry from other platforms, a trend which could portend an uptick in subscriber numbers during the current quarter.
Overall BlackBerry shipped 6 million smartphones in the fourth quarter, so the Z10 represented roughly 17% of Q4 smartphone shipments. Analyst Kevin Smithen at Macquarie Equities Research noted that average revenue per user is actually projected to be lower for users of the new phones than for users of older models running the BB7 operating system. He said that BlackBerry’s service revenue of almost $1 billion was higher than his forecast for the fourth quarter. But his longer term outlook is not positive.
“Z10 is sub-par relative to other smartphone devices including the iPhone5, Samsung Galaxy S IV and HTC One,” Smithen wrote in a research note today. “BBRY will not likely win new subscribers or consumers over with BB10 devices.”
This week the Z10 goes on sale at Verizon Wireless retail stores, after hitting AT&T stores this weekend with minimal publicity. As reported earlier this week, BlackBerry has sold a million devices to wireless distributor Brightstar, but it is unclear how many of those are Z10 phones that are headed for Verizon and AT&T. According to analyst Mark Gerber of Detwiler Fenton, large sales to a distributor could be a sign that the carriers are less committed to promoting Z10 than they are to marketing other phones. When carriers want to promote a device heavily, they often work with the manufacturer directly rather than relying on a third party. Gerber also noted that Brightstar may not have yet taken possession of all the devices it purchased from BlackBerry, and that some may be devices that are not even in production yet.
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