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Of course, BB only sold about 6M BB10 phones the first year and around 12-15M BB10 phones to date (across 4 years of sales). Per Chen's numbers, even with a much leaner company, BB needed to sell 10M BB10 phones per year just to reach break-even - a number they never got close to.
Being successful as a niche player was never possible - BB10 was too expensive to develop for in every aspect, because Mike just assumed that sales volumes were a given. BB10's costs are far higher than a comparible Android phone, for example, and that's because of the software costs (including the costs of QNX drivers for all the hardware - Android drivers are provided for free by the hardware manufacturers but other OS's have to pay a premium price to have drivers developed for their platforms), and because BB has to pay for all of the development of the OS, the security, the APIs, the development platforms, the app store, the payment systems, and on and on. Android manufacturers don't have those costs - because Google handles all of that - and of course Apple is a premium brand that commands premium prices, plus sells in relatively high volumes, so they can afford their costs.
BB10 could only survive with high sales volumes - no volume, no viability.01-27-17 01:26 AMLike 3 - When Mike Lazaridis acquired QNX and decided to use it as the basis on which to build a smartphone OS, he well understood that in doing so - in designing their own complete platform, with proprietary OS that needed proprietary drivers, apps, store, etc., Mike understood that all of this would be very expensive, and the only way to be profitable would be to sell these phones in high volumes. Of course, at the time, BB was setting sales records every quarter - though US sales were already starting to fall, BB was still growing in emerging markets - and so Mike assumed that selling 20M phones a year was a given and that 40-50M was "likely." In that situation, there would be no problem with paying for all of the costs of the platform and regular hardware updates.
Of course, BB only sold about 6M BB10 phones the first year and around 12-15M BB10 phones to date (across 4 years of sales). Per Chen's numbers, even with a much leaner company, BB needed to sell 10M BB10 phones per year just to reach break-even - a number they never got close to.
Being successful as a niche player was never possible - BB10 was too expensive to develop for in every aspect, because Mike just assumed that sales volumes were a given. BB10's costs are far higher than a comparible Android phone, for example, and that's because of the software costs (including the costs of QNX drivers for all the hardware - Android drivers are provided for free by the hardware manufacturers but other OS's have to pay a premium price to have drivers developed for their platforms), and because BB has to pay for all of the development of the OS, the security, the APIs, the development platforms, the app store, the payment systems, and on and on. Android manufacturers don't have those costs - because Google handles all of that - and of course Apple is a premium brand that commands premium prices, plus sells in relatively high volumes, so they can afford their costs.
BB10 could only survive with high sales volumes - no volume, no viability.
Posted via CB1001-27-17 01:37 AMLike 0 -
That's why Android is used by most people. You get a full OS out of the box with a full feature set and a full app store... FOR FREE. The changes OEMs do to their OS costs a fraction of what developing and maintaining a full OS would.DrBoomBotz likes this.01-27-17 01:48 AMLike 1 - The problem is not always just hardware components, but each device sold must also pay for the software work that was put into the OS. And software developers are not cheap at all. Testing the OS is again not cheap.
That's why Android is used by most people. You get a full OS out of the box with a full feature set and a full app store... FOR FREE. The changes OEMs do to their OS costs a fraction of what developing and maintaining a full OS would.
Posted via CB1001-27-17 01:58 AMLike 0 - Sorry, I should have been more clear....I'm asking what their TOTAL cost is per device, after all development costs, hardware costs, manufacturing costs, licensing costs, etc, etc....but NOT including sunk cost that they may be amortizing and otherwise already "spent." Let's look at a Z30 or a Passport for example. What was blackberry's per unit cost on those devices? For comparison, what was their cost on the Priv?
Posted via CB10
Following here is speculation, but it is what I believe to be at least close to the truth.
The hardware cost of the Z30 couldn't have been that high considering it had mid-range specs at the time of its release. However the Z30 was released real soon after the BB10 initial release and I believe its price is influenced a lot by the total development cost of BB10. For the passport, the development costs weren't as high, but I do believe they had to pay for the qualcomm drivers.
The priv I believe had the lowest software development costs; yes, building some app for the priv and hardening the OS costs some money, but nowhere near the amount it would take to develop OS features.01-27-17 02:30 AMLike 0 - I can't give you exact numbers; only BB knows them.
Following here is speculation, but it is what I believe to be at least close to the truth.
The hardware cost of the Z30 couldn't have been that high considering it had mid-range specs at the time of its release. However the Z30 was released real soon after the BB10 initial release and I believe its price is influenced a lot by the total development cost of BB10. For the passport, the development costs weren't as high, but I do believe they had to pay for the qualcomm drivers.
The priv I believe had the lowest software development costs; yes, building some app for the priv and hardening the OS costs some money, but nowhere near the amount it would take to develop OS features.
Posted via CB1001-27-17 02:39 AMLike 0 -
Says BlackBerry CEO, "If we ship 10 million phones in a year, we'll be profitable on phones" | CrackBerry.com
That changed to 5million per year around the time the priv launched: http://www.theverge.com/2015/10/8/94...million-phones
I think the difference in volumes alone speaks to how much more expensive developing BB10 was.01-27-17 02:50 AMLike 0 - I can't give an estimate, but I do believe that Chen spoke the truth when he said he needed to sell 10 million BB10 phones to be profitable:
Says BlackBerry CEO, "If we ship 10 million phones in a year, we'll be profitable on phones" | CrackBerry.com
That changed to 5million per year around the time the priv launched: http://www.theverge.com/2015/10/8/94...million-phones
I think the difference in volumes alone speaks to how much more expensive developing BB10 was.
The key to remember is that profit increases drastically after base cost is met. So if they were selling a device for $600 and their base cost was $550, they were only making $50/device....you have to move a lot of product to make any money. But if you move the needle and spend $700 base cost and then sell at $1200/device you're now making $500/device. Instead of selling 10mm units, you now only have to sell 1mm units.
The hardware partners are important because of the decrease in purchasing power, thereby leveraging an economy of scale that they can bring to the table. Heck, done right, it may even reduce your production costs....its all pie in the sky at this point, obviously. I'm just saying $500-700 is consumer grade premium product pricing, NOT commercial grade pricing. Their mind set on distribution channels is all wrong too, instead of web sales, carrier contracts and retail....they'd need to focus on leveraging existing relationships to their target market like IT staff, business sales teams, executives etc....people who need their device for production rather than consumption.
I think they hit a home run with the Bold, it went to their head, and they got confused. They were never a consumer device company. They always charged more for a phone than the "competition." Think about the old, old days....early 2000's, like 2003-ish, everyone had a Nokia, a few people had Samsungs and Motorolas....but blackberrys were special, because you had to be somebody to own one, because they were expensive to own and operate. The old Nokias were what, $50-$100, the higher end Motorolas were maybe $200 bucks, but the blackberry's were around $400. Double what the then current premium consumer grade phones were. At the time, Blackberry had fewer than 1mm subscribers. They didn't break a million till mid 2004 and they didn't loose their way till 2006/2007 when they decided they were a consumer electronics company. Using the old statistics, they should be charging $1500 for a device today, not $500.
All that said, I think that same commercial market still exists and is still faced with similar problems that it had back in 2004....you can sell 1mm units annually, but it needs to be true commercial grade hardware/software and truly provide productivity to the business. Deliver that, and businesses will gladly pay you $1500/device. Which should deliver the profit margin you need to sustainably operate and develop the company.
It wouldn't be what it was in its glory days, but it would still be for all practical purposes a great business with a great valuation and room for growth. Look at Apple, great companies have ups and downs. But man, whoever thought they could continue selling 10mm units was smoking something funny. Perhaps they should go get into that business. Haha.
Posted via CB1001-27-17 04:37 AMLike 0 - I'm sure he was telling the truth. I'm just suggesting that with the right ingenuity, (which I don't think Chen or BlackBerry have anymore) they could have developed more precisely, targeted a different market, and sold it for a higher price.
The key to remember is that profit increases drastically after base cost is met. So if they were selling a device for $600 and their base cost was $550, they were only making $50/device....you have to move a lot of product to make any money. But if you move the needle and spend $700 base cost and then sell at $1200/device you're now making $500/device. Instead of selling 10mm units, you now only have to sell 1mm units.
The hardware partners are important because of the decrease in purchasing power, thereby leveraging an economy of scale that they can bring to the table. Heck, done right, it may even reduce your production costs....its all pie in the sky at this point, obviously. I'm just saying $500-700 is consumer grade premium product pricing, NOT commercial grade pricing. Their mind set on distribution channels is all wrong too, instead of web sales, carrier contracts and retail....they'd need to focus on leveraging existing relationships to their target market like IT staff, business sales teams, executives etc....people who need their device for production rather than consumption.
I think they hit a home run with the Bold, it went to their head, and they got confused. They were never a consumer device company. They always charged more for a phone than the "competition." Think about the old, old days....early 2000's, like 2003-ish, everyone had a Nokia, a few people had Samsungs and Motorolas....but blackberrys were special, because you had to be somebody to own one, because they were expensive to own and operate. The old Nokias were what, $50-$100, the higher end Motorolas were maybe $200 bucks, but the blackberry's were around $400. Double what the then current premium consumer grade phones were. At the time, Blackberry had fewer than 1mm subscribers. They didn't break a million till mid 2004 and they didn't loose their way till 2006/2007 when they decided they were a consumer electronics company. Using the old statistics, they should be charging $1500 for a device today, not $500.
All that said, I think that same commercial market still exists and is still faced with similar problems that it had back in 2004....you can sell 1mm units annually, but it needs to be true commercial grade hardware/software and truly provide productivity to the business. Deliver that, and businesses will gladly pay you $1500/device. Which should deliver the profit margin you need to sustainably operate and develop the company.
It wouldn't be what it was in its glory days, but it would still be for all practical purposes a great business with a great valuation and room for growth. Look at Apple, great companies have ups and downs. But man, whoever thought they could continue selling 10mm units was smoking something funny. Perhaps they should go get into that business. Haha.
Posted via CB10
The problem is that at the time when BB was successful, the BB package deal was the best. You had the apps(however few they were), you had better internet and they had security. Now they just have security. You cannot ask 1500$ for a phone just for security.
You can't really sell security to consumers. Security might sell to companies, but there are very few companies that really really need that much security as BB10 offers at the expense of the app ecosystem. For most companies an iOS device combined with an MDM solution offers the good compromise between security and usability. A good IT manager will know that the "scary" hacks that the media was talking about (like the icloud one) have nothing to do with the phones themselves, but they are attacks on the server side, for which your mobile OS of choice can't protect you against.app_Developer likes this.01-27-17 05:20 AMLike 1 - If you're looking for a guess on what a BB10 device would have to sell for to at least breakdown, we need to make a couple of assumptions.
Let's say we sell 250,000 units a year, and the device hardware itself (due to very low volume production) costs $300.
Let's say that full blown OS development (to keep up with others), including support, physical plant, and all the other required infrastructure is $750 million per year. Let's also say that life support-only level of development is about $100 million - just minor updates, support, etc.
So, breakeven would be $3,300 per device for full development, or $700 per device for life-support development.
The fact that you'd be hard pressed to sell 250,000 units at $3,300 each only exacerbates the problem.bob03sue and anon(9803228) like this.01-27-17 08:03 AMLike 2 - To add/clarify what conite is talking about, you have to keep in mind that it's a sliding scale - the fewer devices you sell, the (dramatically) more your cost-per-device, because all of the development costs, marketing, distribution, platform support, etc. costs have to be spread over fewer devices. Conite gives an example (with the super-high wholesale cost BB would need to charge just to break even), but if you sell a small percent less, that minimum wholesale price goes up - a lot! And every time the price goes up, it gets harder to sell the required numbers.01-27-17 10:03 AMLike 0
- The other issue is that "life-support" level of support means that you are standing in place as your competition moves forward - which means that as time goes on, you are less and less competitive, and will sell fewer and fewer units, which means that your cost-per unit goes up and up. It's not sustainable - only full development is sustainable, and if you can't sell enough units to make a profit with full development, then you don't have a viable business model.app_Developer likes this.01-27-17 10:17 AMLike 1
- The other issue is that "life-support" level of support means that you are standing in place as your competition moves forward - which means that as time goes on, you are less and less competitive, and will sell fewer and fewer units, which means that your cost-per unit goes up and up. It's not sustainable - only full development is sustainable, and if you can't sell enough units to make a profit with full development, then you don't have a viable business model.01-27-17 10:28 AMLike 0
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Posted via CB1001-27-17 02:41 PMLike 0 - I can't give an estimate, but I do believe that Chen spoke the truth when he said he needed to sell 10 million BB10 phones to be profitable:
Says BlackBerry CEO, "If we ship 10 million phones in a year, we'll be profitable on phones" | CrackBerry.com
That changed to 5million per year around the time the priv launched: http://www.theverge.com/2015/10/8/94...million-phones
I think the difference in volumes alone speaks to how much more expensive developing BB10 was.
Posted via CB1001-27-17 03:03 PMLike 0 - Everyone just makes thinks up but talks like they are a voice from atop Mt. Olympus. It's an echo chamber. And no one questions the conventional wisdom that there is no value or market in BB10 because people need their Instachat for their teen romances rather than productivity and peace of mind.
Posted via CB10
DTEK60 / Z3001-27-17 03:03 PMLike 0 -
Posted via CB1001-27-17 03:20 PMLike 0 -
http://forums.crackberry.com/news-ru...e-tat-1015235/01-27-17 03:44 PMLike 0 -
Do you not see how the breakeven point would be significantly less with Android instead of BB10.
Cost of development/ops of Android < cost of development/ops of BB10
Therefore, the breakeven point would be lower, assuming similar ASP. It's not difficult to work out.01-27-17 06:56 PMLike 0 - The number didn't change because Chen switched to decaf.
Do you not see how the breakeven point would be significantly less with Android instead of BB10.
Cost of development/ops of Android < cost of development/ops of BB10
Therefore, the breakeven point would be lower, assuming similar ASP. It's not difficult to work out.
Posted via CB1001-27-17 08:23 PMLike 0 -
And no, "You could tell by the way he said it" is not evidence. It's speculation.DrBoomBotz likes this.01-27-17 08:41 PMLike 1 -
Also, he gave no explanation of going from 10 million to 5 million and never suggested these numbers were the product of any sort of financial analysis rather than simply being numbers off the top of his head.
Can someone track down the date of the change to 5 million and the release of the Priv (or rumors of its release)?
Posted via CB1001-27-17 08:48 PMLike 0 -
5M statement made on Oct 8, 2015. http://www.theverge.com/2015/10/8/94...million-phonesTroy Tiscareno likes this.01-27-17 09:36 PMLike 1
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