BlackBerry Posts Quarterly Profit, Ships 1 Million Z10 Phones

BlackBerry Z10 sales and internal changes led to a quarterly win. Still, BlackBerry lost 3 million customers and finished the year in the red.

BlackBerry surprised analysts by posting a profit for the fourth quarter of its fiscal 2013, which closed March 2, a few weeks after the long-awaited launch of its BlackBerry 10 mobile platform and BlackBerry Z10 smartphone.

"To say it was a challenging environment to deliver improved results in could be the understatement of the year," CEO Thorsten Heins said during a March 28 morning earnings call.

The company has been counting on the new platform to strengthen its ailing brand and support it over the next decade as it evolves from a smartphone company into what company officials call a "mobile computing leader." Heins has offered vague assurances of the last few weeks that the Z10 is selling well, but during the call, he said that 6 million BlackBerry smartphones shipped during the quarter, about 1 million of which were Z10 units.

More importantly, Heins said that 55 percent of the global customers who purchased a Z10 had switched from another platform—a "strong testament to the strength of the product."

While BlackBerry finished its quarter in the black, its full-year 2013 ended in the red, and it additionally posted a loss of 3 million customers, who Heins said were mostly from its prepaid segment. BlackBerry's base is now down to 76 million subscribers.

The CEO spent the first minutes of the call not celebrating the quarter's accomplishments but detailing what sounded—at least to a listener anxious for statistics and juicy details—like housekeeping, such as changes to its executive structure and to its board of directors and investments in its application ecosystem. These changes, however, along with what's expected to be growing device sales, make the company feel confident that it will at least break even next quarter.

Heins repeated throughout the call that these are still "early days" for BlackBerry 10 and the Z10, which is right. The device has been available in the United States for less than a week—AT&T and Best Buy began selling it March 22, and T-Mobile began offering it on March 26. Verizon Wireless began selling it March 28.

BlackBerry will also begin selling a QWERTY keyboard-equipped Q10 smartphone in April, which is also likely to help sales. Heins said it's currently testing with 40 carriers in 20 countries.

"Certainly, enterprises are extremely hot on getting the Q10," Heins said. "There are some die-hard keyboard lovers out there."

Analyst Jack Gold, a principal with J. Gold Associates, said that given the industry's expectations, BlackBerry did "quite well." Though the loss of subscribers was "troubling," he added in a March 28 research note, BlackBerry, in fairness, didn't have new devices available to keep them from leaving.

"It's the next one to two quarters that will really tell the story of how well the devices are being received in the U.S.," said Gold, adding that BlackBerry's noted commitment to increasing its marketing should help.

"They have to build some excitement to get people interested," he added.

Gold also noted that while the 55 percent of Z10 buyers who switched platforms is "encouraging," the company didn't say whether that was "for users of other smartphones or for upgrades from feature phones."

The company also shared during the call that Mike Lazaridis, a co-founder of Research In Motion, the inventor of the BlackBerry and one of the longtime CEOs whom Heins replaced, is retiring as vice president and a board director of the company to pursue the launch of Quantum Valley Investments, a new venture Lazaridis announced last week.

Heins said Lazaridis is "widely recognized as one of Canada's greatest innovators." He added, "We deeply respect and appreciate Mike's desire to devote his full-time efforts to his exciting new venture, and we wish him all the best."

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