Stop Quoting 70 Million Subscribers and $3 billion of Cash
- Stop quoting the 70 million users and $3 billion of when trying to defend BlackBerry. You're perpetuating a false sense of security.
Most phones are sold on 2 or 3 year contracts. Let's look at the historical Q1 unit volumes.
In Q1/11 - 3 years ago, BlackBerry sold 11.2 million phones. Almost all were connected to BlackBerry's servers and generated $60/year of service revenue.
In Q1/12 - 2 years ago, BlackBerry sold 13.2 million phones. Almost all were connected to BlackBerry's servers and generated $60/year of service revenue.
In Q1/13 - 1 years ago, BlackBerry sold 7.8 million phones. Almost all were connected to BlackBerry's servers and generated $60/year of service revenue.
In Q1/14 - 2 months ago, BlackBerry sold 7.0 million phones. Approximately 4 million were BB7 or older and 3 million BB10's. BB10 devices don't necessarily contribute to service revenue. It's only the corporate versions that do and the rate is variable, depending on the level of service. Consumers are no longer paying the BlackBerry network access fee.
The sales trend is alarming because the service revenue is based on that "70 million" number people keep quoting. As you can see from the sales trend above and knowing that phones are on a 2 or 3 year contract, it's pretty easy to see that the service revenue - the only profitable portion of BlackBerry - is about to decline very quickly. During the last earnings call, management stated that they are no longer going to be proving this number. This is why. Installed base and service revenue is about to start falling off a cliff.
Additionally, this is why developers don't care about BlackBerry. Through May 31, 2013, only 5 million BB10's had been sold. Assuming 1 million of month of sales, maybe we're up to 7 million now. We're a passionate community, but not a very big one.
The cash balance everyone refers to - the $3.1 billion - almost all of the increase in the past year or so was related to working capital management and this is a one-time trick. This is comprised of inventory, accounts payable and accounts receivable. Management was able to increase cash by buying less inventory, selling the inventory the did have, taking longer to pay their bills and trying to collect money from people who own money to them, quicker. They also got a huge, several hundred million dollar tax refund which didn't hurt.
As a point of reference, in the last fiscal year, BlackBerry spent $3.6 billion on R&D, marketing and administration costs. They've cut some costs since then, but you get the idea. $3.1 billion sounds like a lot, but it can disappear very, very quickly.
The scary part is this increase in cash was only achieved by cleaning up the balance sheet and before cash flow from service revenue started to decline materially. The next few quarters are going to be very scary for BlackBerry unless the basically double current handset sales or rapidly roll out BES10 (the one bright spot they have). BES10 has huge potential. They charge $90 per year per handset and can manage iPhone and Android. The problem is the software is still buggy.
So again, please stop quoting the 70 million subscribers - it's akin to being told that a 100lbs bar of gold is valuable while you're trying to tread water - normally yes, but in this instance, no. The 70 million number is much less now, it's falling rapidly and BB10 developers don't care about 65 million of them. The cash balance is nice cushion for now, but if management doesn't start generating serious cash flow from BES10/ BB10 handset sales, it's going to disappear very quickly.08-19-13 06:02 PMLike 28 - I prefer blackberry because its just better feel. I don't need to defend blackberry, non of my business...
And who the hell are you to tell people about that?
Lol
Posted via CB1008-19-13 06:07 PMLike 0 - I too am sick of hearing people talk about the 3.1 billion in cash, especially when 1.5 billion is in long term investment...
3.1 billion can disappear very very fast, and this qrter is going to be extremely interesting.schmeat and Henraay0623 like this.08-19-13 06:14 PMLike 2 -
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Posted via CB10 on a kick *** Q1008-19-13 06:19 PMLike 7 -
Posted via CB1008-19-13 06:21 PMLike 8 -
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Swipe, swipe it good...via CB10 from my Z1008-19-13 06:24 PMLike 4 - I think its closer to 77 million and maybe about 3.2 billion cash in hand plus other little whatnots....but my count could be off by a few decimals or so, but yeah its time we stop quoting 70 million subscribers and $3 billion dollars cash seeing as how that money is not even ours or Crackberry's or even mine. Truth be told I would love 70 million subscribers and $3 billion dollars in cash. Can anyone tell me how to get 70 million subscribers and 3 billion dollars in cash? I would love to have 70 million subscribers and $3 billion dollars in cash. How do I.....never mind. I now go buy lotto ticket08-19-13 06:30 PMLike 6
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- 08-19-13 06:33 PMLike 0
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So all in all BB10 is *not* contributing to annual service fees. BlackBerry are very well aware of this, so do not expect them to read your post and say: Hey we really missed that! ;-)
I guess BB hoped they had sold much more devices by now and thereby beeing compensated somewhat from sales of Apps, Music and Videos, but it does not look like it happened as fast as they expected.
/JP
PS: Do I get the geek-sticky-marker attached to me when I notice this is my 2^7th post? ;-)08-19-13 06:36 PMLike 0 - The large one is coming Soon�, in the meanwhile you can Keep Moving
Courtesy of Thorsten Heins himselfcurrentodysseys likes this.08-19-13 06:37 PMLike 1 - I can't speak for all carriers etc, but I have not yet heard of a single country where BB10 needs a specific BB subscription to work. BES 10 CALS are more or less free if you have an existing BES 5 and only a very small subset of customers pays for T-Support.
So all in all BB10 is *not* contributing to annual service fees.
I guess BB hoped they had sold much more devices by now and thereby beeing compensated somewhat from sales of Apps, Music and Videos, but it does not look like it happened as fast as they expected.
/JP
The potential offset, is that BES10 is able to manage other devices - it's not an easy sell though.08-19-13 06:38 PMLike 0 -
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Indirectly there are some protential (BB World one example), but their "Mobile Computing Platform" vision does not seem to have kicked off yet.
I *really* would love to get a clear statement from BB about what they vision or even plan to deliver in the context of "Mobile Computing Platform".08-19-13 06:42 PMLike 0 - Directly they only contributes with the profit of the handheld.
Indirectly there are some protential (BB World one example), but their "Mobile Computing Platform" vision does not seem to have kicked off yet.
I *really* would love to get a clear statement from BB about what they vision or even plan to deliver in the context of "Mobile Computing Platform".08-19-13 06:46 PMLike 3 - Stop quoting the 70 million users and $3 billion of when trying to defend BlackBerry. You're perpetuating a false sense of security.
Most phones are sold on 2 or 3 year contracts. Let's look at the historical Q1 unit volumes.
In Q1/11 - 3 years ago, BlackBerry sold 11.2 million phones. Almost all were connected to BlackBerry's servers and generated $60/year of service revenue.
In Q1/12 - 2 years ago, BlackBerry sold 13.2 million phones. Almost all were connected to BlackBerry's servers and generated $60/year of service revenue.
In Q1/13 - 1 years ago, BlackBerry sold 7.8 million phones. Almost all were connected to BlackBerry's servers and generated $60/year of service revenue.
In Q1/14 - 2 months ago, BlackBerry sold 7.0 million phones. Approximately 4 million were BB7 or older and 3 million BB10's. BB10 devices don't necessarily contribute to service revenue. It's only the corporate versions that do and the rate is variable, depending on the level of service. Consumers are no longer paying the BlackBerry network access fee.
The sales trend is alarming because the service revenue is based on that "70 million" number people keep quoting. As you can see from the sales trend above and knowing that phones are on a 2 or 3 year contract, it's pretty easy to see that the service revenue - the only profitable portion of BlackBerry - is about to decline very quickly. During the last earnings call, management stated that they are no longer going to be proving this number. This is why. Installed base and service revenue is about to start falling off a cliff.
Additionally, this is why developers don't care about BlackBerry. Through May 31, 2013, only 5 million BB10's had been sold. Assuming 1 million of month of sales, maybe we're up to 7 million now. We're a passionate community, but not a very big one.
The cash balance everyone refers to - the $3.1 billion - almost all of the increase in the past year or so was related to working capital management and this is a one-time trick. This is comprised of inventory, accounts payable and accounts receivable. Management was able to increase cash by buying less inventory, selling the inventory the did have, taking longer to pay their bills and trying to collect money from people who own money to them, quicker. They also got a huge, several hundred million dollar tax refund which didn't hurt.
As a point of reference, in the last fiscal year, BlackBerry spent $3.6 billion on R&D, marketing and administration costs. They've cut some costs since then, but you get the idea. $3.1 billion sounds like a lot, but it can disappear very, very quickly.
The scary part is this increase in cash was only achieved by cleaning up the balance sheet and before cash flow from service revenue started to decline materially. The next few quarters are going to be very scary for BlackBerry unless the basically double current handset sales or rapidly roll out BES10 (the one bright spot they have). BES10 has huge potential. They charge $90 per year per handset and can manage iPhone and Android. The problem is the software is still buggy.
So again, please stop quoting the 70 million subscribers - it's akin to being told that a 100lbs bar of gold is valuable while you're trying to tread water - normally yes, but in this instance, no. The 70 million number is much less now, it's falling rapidly and BB10 developers don't care about 65 million of them. The cash balance is nice cushion for now, but if management doesn't start generating serious cash flow from BES10/ BB10 handset sales, it's going to disappear very quickly.08-19-13 07:02 PMLike 0 -
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Stop Quoting 70 Million Subscribers and $3 billion of Cash
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