[notfanboy]

From the Wall Street Journal:

BlackBerry�s showing was so weak that IDC noted in its release that the Canadian company had reached �levels not seen in the history of IDC�s mobile phone tracker."
...
Many others such as BlackBerry and Nokia are losing money in the business, it estimates.

Does IDC have any way to estimate the profit margin? Does anyone know what their methodology might be?

If this number is true, how long can they afford to stay in the hardware business?

[LazyEvul]

Depending on how you interpret this, they could be right - last quarter, BlackBerry did post a loss, so in the big picture for that quarter they're losing money per device.

However, on the basis of how much it costs them to build a device versus how much they sell it for, BlackBerry definitely isn't selling devices at a loss - in fact, if I remember correctly their margins have gone up with BlackBerry 10. They need to sort other aspects of the business to post a net profit, but the device margins are not the problem.

[notfanboy]

Depending on how you interpret this, they could be right - last quarter, BlackBerry did post a loss, so in the big picture for that quarter they're losing money per device.

However, on the basis of how much it costs them to build a device versus how much they sell it for, BlackBerry definitely isn't selling devices at a loss - in fact, if I remember correctly their margins have gone up with BlackBerry 10. They need to sort other aspects of the business to post a net profit, but the device margins are not the problem.

Is it the marketing and distribution costs that nullify the margins?

[LazyEvul]

Is it the marketing and distribution costs that nullify the profits?

I haven't looked too far into it, but that is most likely the case yes. Might not be distribution, as they've been working hard to keep the supply chain efficient with BlackBerry 10, but marketing is part of the equation for sure. There could be a lot of R&D costs going on behind the scenes too. They also had political issues in Venezuela last quarter that meant they were unable to claim the money made there - if it weren't for those, I believe they would have come very close to breaking even.

[ibpluto]

Is it the marketing and distribution costs that nullify the margins?

More like the old BBOS phones nullify the BB10 margins

Swipe, swipe it good...via CB10 from my Z10

[LazyEvul]

More like the old BBOS phones nullify the BB10 margins

Swipe, swipe it good...via CB10 from my Z10

That's certainly not the case, no. BBOS phones are not sold at a loss either, though they have much lower margins than BB10. However, they are investing money in the 9720 - that's one of several expenditures that could have contributed to the net loss that quarter.

Edit: Actually, I may be wrong about BBOS phones. They might be sold at a slight loss at this point, but it's nowhere near enough to offset the BB10 margins entirely.

[Zarpan]

The profit estimates actually come from Canaccord, not IDC (see small print at the bottom of the chart).

It looks like they attribute a bunch of operating expenses (such as marketing) to the hardware division to get to that figure. BlackBerry's gross margin on hardware was around plus 14%, with BB10 devices being somewhere over 20%.

[rodan01]

I didn't know the situation was that bad.

[heymaggie]

Anyone who has take a couple of business classes knows that there are fixed costs and variable costs. In order to make a profit, overall, you have to make some margin on each device selling at higher than your variable costs and then overcome your fixed costs.

Whether or not you are making a profit on a particular product line is a matter of accounting. However, this kind of negative profit margin comes from not selling enough devices to overcome your fixed costs. This is a big company that is sized to sell a lot more devices than it is selling right now so the fixed costs are probably considerable.

This is also why Blackberry can't just sit around and spend $3B in cash over the next couple of years because this kind of analysis will continue to look worse and push the stock price low enough that shareholders will eventually opt for liquidation.

[Kris Erickson]

The profit estimates actually come from Canaccord, not IDC (see small print at the bottom of the chart).
.

Wait isn't Canaccord one of those that constantly bash BB and publish false articles as facts?? I could be wrong.. Also how can you attribute Marketing to the Manufacturing cost? If as the title says profit margin / phone that to me is XXX cost to make it and xxx cost is what we sold it for and yyyy is the profit/loss. Now you toss in marketing that is something else. Why not toss in overhead, taxes, stock depreciation, R&D costs, etc etc...

[RECOOL]

canacoord its over close thread.

[njblackberry]

And another reason they have to keep laying off people. While some may be attributable to "cutting the fat", Heins has proven that he is a master at cutting expenses. And maintaining that cash horde. Making a profit (and phones that sell) is another story.

[RubberChicken76]

That's certainly not the case, no. BBOS phones are not sold at a loss either, though they have much lower margins than BB10.

I've heard differently on this. That the BBOS phones as a collective whole are negative margins where as the BlackBerry 10 devices are positive. This doesn't necessarily mean that all BBOS devices are money losers but that the line itself is likely negative from a hardware perspective.

[LazyEvul]

I've heard differently on this. That the BBOS phones as a collective whole are negative margins where as the BlackBerry 10 devices are positive. This doesn't necessarily mean that all BBOS devices are money losers but that the line itself is likely negative from a hardware perspective.

Read my edit of that same post.

Posted via CB10

[pillswoj]

The profit estimates actually come from Canaccord, not IDC (see small print at the bottom of the chart).

It looks like they attribute a bunch of operating expenses (such as marketing) to the hardware division to get to that figure. BlackBerry's gross margin on hardware was around plus 14%, with BB10 devices being somewhere over 20%.

And what would be considered Average or Good Gross Margins in the consumer device market? I know in Chemical Manufacturing if it was under 30% it wasn't worth doing and we did not have near the marketing expense of a consumer business.