What's Next for BlackBerry?

 | Mar 28, 2013 | 3:30 PM EDT
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BlackBerry's (BBRY) fourth-quarter earnings this morning were good enough to push up the stock more than 2% higher today. Let's review the results compared to key issues I highlighted in yesterday's column.

The company shipped 1 million Z10s in the quarter. That's right around consensus -- not a blowout by any means, but certainly not an underwhelming PlayBook-type result.

I wrote that BlackBerry needs to convert about a quarter of its existing subscriber to the new phones to have a hit on its hands. There were a couple of good data points from today's report. First, it said that about 55% of the Z10 buyers in the quarter were not previously BlackBerry subscribers. That's actually much higher than I expected. I had heard this number was more like 33%. That's very promising; however, CEO Thorsten Heins also said that the big upgrades from the existing subscriber base would start once the Q10 QWERTY model hits the market next month.

Most expected the cash balance to drop -- some said significantly -- but it stayed flat at $2.9 billion. Of course, marketing expenses are going to ramp up by half in the current quarter. Still, this shows there's no reason to think the company is in any jeopardy, which is partly what the bears had been hoping for.

There was a huge scare in services revenue in the December earnings call. People were expecting this highly profitable revenue to go from $1 billion a quarter to zero. It only went down about 15% and Heins guided that it would decrease by single digits in the current quarter. That's a huge relief for BlackBerry bulls. They hope that the company will more than compensate for this through licensing deals and other new revenues.

I expected BlackBerry to resume full forward guidance. It didn't go that far. But it did guide for marketing cost increases and said that it would again be profitable this quarter. I would have liked the full details but I'm happy to get this much. What's obvious is that the company is being very conservative after learning the hard way about overpromising and under-delivering. When it says it should be profitable this quarter, to me, that sounds like it'll be wildly profitable.

So now what should you watch for now? The big catalysts should be:

  • Signs of success at Verizon (VZ) and T-Mobile in the U.S. Is BlackBerry going to get off on a better foot compared to AT&T (T)?
  • A similar ramp-up in the stock in anticipation of the official launch of the Q10. This will be phased in by carrier around the world, depending on where it's been tested. But the Q10 should really be embraced by the BlackBerry faithful. I saw someone say that the delay between the Z10 and Q10 might really cause existing Blackberry subs to switch to iPhone or Android. I thought to myself, if you're a BlackBerry subscriber and you've waited this long for a new phone, another three months is not going to be a deal-breaker.
  • BB10 operating system licensing deals with the likes of LG, Lenovo or Samsung.

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