BlackBerry Counting on the Emerging Markets

If BlackBerry (Nasdaq: BBRY) was hoping that a name change would improve their performance, then they must have been disappointed so far. But things seem to be improving a bit in the new year. Recently, Pentagon announced plans to purchase 80,000 BlackBerry smartphones as BlackBerry continues to be known as the most secure mobile phone in the market. The new announcement has helped improve their stock price, which had fallen more than 35% last year.

BlackBerry’s Financials

BlackBerry’s last reported quarterly results were a disappointment as usual. Third quarter revenues fell 56% over the year to $1.19 billion, falling significantly short of the market’s projections of $1.59 billion. Loss per share of $0.67 was also wider than the Street’s projected loss of $0.46 per share.

Overall, they reported a massive $4.4 billion in losses on account of cash impairment charges and write-off of supply commitments and unsold inventories. Essentially, the loss was the confirmation of the poor performance of their latest Z10 phones as they had to write down a huge inventory on these phones. Analysts believe that BlackBerry’s failure was attributed to the high price they had awarded to the Z10. BlackBerry did cut down the price by $49 nearly 4 months after the launch of the product, but it was probably too little, too late.

During the quarter, BlackBerry sold 1.9 million smartphones compared with 3.7 million phones sold a quarter ago. To add to their worries, the older version BlackBerry 7 accounted for more than 70% of these sales.

BlackBerry’s Renewed Strategy for Emerging Markets

By region, North America brought in 28.5% of the quarter’s revenue with Europe, the Middle East and Africa accounting for 46% of the revenue. Emerging markets of Latin America and Asia Pacific contributed 11.3% and 14.2%, respectively.

BlackBerry is continuing its focus on the emerging markets to help drive growth. They tied up with Taiwanese device manufacturing firm Foxconn for a five-year agreement. Foxconn is known for their contract with Apple and the recent tie-up engages their skills with BlackBerry as well. As part of the agreement, Foxconn will manufacture BlackBerry’s low-cost smartphones for the emerging markets out of their facilities in Indonesia and Mexico. BlackBerry hopes that with the agreement, they will be able to concentrate on their core skills of security, software development, and enterprise mobility management while leveraging Foxconn’s scale and efficiency and help it cut down on hardware costs. The company expects this move to help them turn profitable by the year 2016.

To remain more relevant within the emerging markets, BlackBerry also announced that original equipment manufacturers in India, Africa, Indonesia, Latin America, and the Middle East will be pre-installing BlackBerry Messenger on Google Android devices. Recently, BlackBerry had enabled the messenger (BBM) to be active on non-BlackBerry devices as well. BBM is known to be one of the most secure mobile-messaging service available and within 60 days of its launch, the app saw more than 40 million new iOS and Android users registering to use it.

BlackBerry’s stock is trading at $10.78 with a market capitalization of $5.59 billion. It touched a 52-week high of $18.32 in January last year.