11-14-16 01:57 PM
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  1. ardakca's Avatar
    In the earnings call they clearly said that BlackBerry will end hardware production at the end of the fiscal year. Moreover, we have discussed it several times, just manufacturing a phone costs around 200 $ (mid range might be lower). So a very successful business is where you have 40% profit. But this is not the case for smartphones. Sony has the highest profit margin from a single unit. Their average selling price is 422 $ and their pure profit is 23.2 $ so it is around %5 percent a unit? So let's assume BlackBerry sells the mercury for 550 $ and an average mid range is around 200 for pure manufacturing costs, you have 350 $ left. And highest profit margin is %5 which accounts for 22.5 $.

    Putting it simply, you spend 200 for manufacturing, you'll have 23 $ dollar pure profit, which leaves us with 327 $ dollars for design, distribution and marketing. We know there are no marketing ). BlackBerry already spent around 300 a unit for their estimate selling numbers. So if they sell this phone even for 350 $ they won't have to write it down, plus if it gains ground they will have solid case for licensees.

    So I believe shareholders must lay easy. I am kind of bullish on this one. The reason Chen gave the green light IMO is they already wrote down the design and R&D costs for the Mercury. Thus, a limited production (their estimate) would have no impact if they can sell at a price point which includes manufacturing, distribution and maintenance? We should find numbers. In my case everything is kind of an assumption. There might be nothing crazy about it after all.
    11-13-16 07:27 AM
  2. ControlsGeek's Avatar
    During the earnings call JC says they are getting out of hardware.
    Then they release the DTEK60.
    Now he is committing to release a keyboard phone.
    So... they are not out of hardware?

    I can't make sense of it.
    I thought all along he was playing the fool now I am not so sure he was playing.
    Can someone explain this to me?
    Is an Extinction Level Event coming and I missed the memo?
    I think Chen has said they are "getting out of hardware" but it's a process. It takes time. And he also said he had one more phone on his desk. He was testing it so obviously the design is completed. The thing is ready to release most likely and all that remains is the release planning and marketing. The money has been spent on the design so if they don't release it then it's a loss. If they do release it ... perhaps... they can recoup some of the costs. Even if it doesn't sell well at least its some revenue to offset the sunk costs. Timing the release so it doesn't cannibalize the DTEK 60 and other phones is going to be the trick.
    11-13-16 09:53 AM
  3. DrBoomBotz's Avatar
    I think Chen has said they are "getting out of hardware" but it's a process. It takes time. And he also said he had one more phone on his desk. He was testing it so obviously the design is completed. The thing is ready to release most likely and all that remains is the release planning and marketing. The money has been spent on the design so if they don't release it then it's a loss. If they do release it ... perhaps... they can recoup some of the costs. Even if it doesn't sell well at least its some revenue to offset the sunk costs. Timing the release so it doesn't cannibalize the DTEK 60 and other phones is going to be the trick.
    \

    If they have not yet done the production order then we are talking about https://youarenotsosmart.com/2011/03...-cost-fallacy/
    This may or may not be news to you but I am very certain Chen knows all about it.
    11-13-16 10:07 AM
  4. TGR1's Avatar
    In the earnings call they clearly said that BlackBerry will end hardware production at the end of the fiscal year. Moreover, we have discussed it several times, just manufacturing a phone costs around 200 $ (mid range might be lower). So a very successful business is where you have 40% profit. But this is not the case for smartphones. Sony has the highest profit margin from a single unit. Their average selling price is 422 $ and their pure profit is 23.2 $ so it is around %5 percent a unit? So let's assume BlackBerry sells the mercury for 550 $ and an average mid range is around 200 for pure manufacturing costs, you have 350 $ left. And highest profit margin is %5 which accounts for 22.5 $.

    Putting it simply, you spend 200 for manufacturing, you'll have 23 $ dollar pure profit, which leaves us with 327 $ dollars for design, distribution and marketing. We know there are no marketing ). BlackBerry already spent around 300 a unit for their estimate selling numbers. So if they sell this phone even for 350 $ they won't have to write it down, plus if it gains ground they will have solid case for licensees.

    So I believe shareholders must lay easy. I am kind of bullish on this one. The reason Chen gave the green light IMO is they already wrote down the design and R&D costs for the Mercury. Thus, a limited production (their estimate) would have no impact if they can sell at a price point which includes manufacturing, distribution and maintenance? We should find numbers. In my case everything is kind of an assumption. There might be nothing crazy about it after all.
    It's a bit hard to predict mfg costs because it really depends on the agreements. What doesn't align with your calculations is that according to earning report summaries almost every publicly traded Android OEM is either not making a profit or barely scraping one up. Those aren't good odds for a newish entrant that doesn't have a very visible or attractive hook, as far as I can see.

    Btw, I am not against playing the long game but I hope BBRY brings something significant/measurable to software soon. Sort of need to, for mindshare if nothing else.
    11-13-16 05:03 PM
  5. LuvULongTime's Avatar
    There isn't much to wonder. Chen's focus is SW. From a HW perspective he will throw anything against the wall and see if it sticks. And while he is doing both of those things he will hope he can make the company profitable enough to entice a takeover. Because that's what he was really brought in to do. Prem Watsa made a bad bet and wants to get his money back.
    11-13-16 07:11 PM
  6. ardakca's Avatar
    It's a bit hard to predict mfg costs because it really depends on the agreements. What doesn't align with your calculations is that according to earning report summaries almost every publicly traded Android OEM is either not making a profit or barely scraping one up. Those aren't good odds for a newish entrant that doesn't have a very visible or attractive hook, as far as I can see.

    Btw, I am not against playing the long game but I hope BBRY brings something significant/measurable to software soon. Sort of need to, for mindshare if nothing else.
    Correct. Android OEMs are struggling. I just wanted to point out how much BlackBerry had already spent on the device. Scrapping it or releasing it might not differ after all.
    11-13-16 11:03 PM
  7. anon(9607753)'s Avatar
    [QUOTE=DrBoomBotz;12664968]\

    If they have not yet done the production order then we are talking about https://youarenotsosmart.com/2011/03...-cost-fallacy/
    This may or may not be news to you but I am very certain Chen knows all about it.[/jQUOTE]

    Interesting...loss psychology to explain the rationale of bean-counter-in-Chief John Chen? Kind of hard to see an emotional attachment to the device business when it's been chopped out of existence, but hey whatever. It was good for a laugh...
    11-14-16 01:10 PM
  8. cbvinh's Avatar
    If they have not yet done the production order then we are talking about https://youarenotsosmart.com/2011/03...-cost-fallacy/
    This may or may not be news to you but I am very certain Chen knows all about it.
    The chocolate experiment cited seems flawed, or an additional condition needs to be run. Hershey's Kisses were 1 cent and Lindt Truffles were 15 cents and people went for the Truffles because of value, but when the Kisses were dropped to free and Truffles were 14 cents, people went for free instead of the Truffles. The researchers said that mathematically, it's no different so people should have responded the same, but because of lack of sunk value, people choose the lesser quality. A better experiment would have started at 2 cent Kisses and drop the price to 1 cent because at free, there's no sunk loss at all on the part of the buyer. Taking free Kisses doesn't mean consuming said Kisses.

    As for Farmville and some people losing jobs over it "due to sunk loss"... There are people who get addicted to things no matter what it is. Early on, a researcher devised a game to produce relevant tags for photos. The game didn't pay anything other than keep account the number of tags a player produced. Something like 12% of the players produced 90% of the results.
    11-14-16 01:52 PM
  9. DrBoomBotz's Avatar
    [QUOTE=kputock;12666268]
    \

    If they have not yet done the production order then we are talking about https://youarenotsosmart.com/2011/03...-cost-fallacy/
    This may or may not be news to you but I am very certain Chen knows all about it.[/jQUOTE]

    Interesting...loss psychology to explain the rationale of bean-counter-in-Chief John Chen? Kind of hard to see an emotional attachment to the device business when it's been chopped out of existence, but hey whatever. It was good for a laugh...
    Glad I could amuse you.
    11-14-16 01:54 PM
  10. DrBoomBotz's Avatar
    The chocolate experiment cited seems flawed, or an additional condition needs to be run. Hershey's Kisses were 1 cent and Lindt Truffles were 15 cents and people went for the Truffles because of value, but when the Kisses were dropped to free and Truffles were 14 cents, people went for free instead of the Truffles. The researchers said that mathematically, it's no different so people should have responded the same, but because of lack of sunk value, people choose the lesser quality. A better experiment would have started at 2 cent Kisses and drop the price to 1 cent because at free, there's no sunk loss at all on the part of the buyer. Taking free Kisses doesn't mean consuming said Kisses.

    As for Farmville and some people losing jobs over it "due to sunk loss"... There are people who get addicted to things no matter what it is. Early on, a researcher devised a game to produce relevant tags for photos. The game didn't pay anything other than keep account the number of tags a player produced. Something like 12% of the players produced 90% of the results.
    My mistake I posted the wrong link sunk cost fallacy Meaning in the Cambridge English Dictionary
    11-14-16 01:57 PM
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