Earlier this week, BlackBerry’s CEO John Chen posted a letter to customers. While he provided some sense of his strategy going forward, he unfortunately continues the tradition started by his predecessors of failing to answer the most compelling questions customers (and investors) have:
Is there any reason to believe the atrocious trend in device sales will turn around? If so, what?
Device shipments have now dropped 75% from their peak in 2011, and although it’s possible we’ll see a small blip next quarter from steep discounts on the Z10, the trend is likely to continue downward. Chen needs to explain what, if anything, will cause these same poorly-selling devices to start selling better, or allow any future devices to be more appealing to users. As of right now, there’s no evidence of either of those things, and as such we have to assume shipments will continue dropping, and with them what has historically been the largest chunk of overall revenues.
In the absence of that, is there any reason to believe service revenues won’t follow suit very soon?
Service revenues make up most of the rest of BlackBerry’s overall revenues, which is why some people seem to think it’s the most promising avenue for BlackBerry going forward. But the reality is that these service revenues are directly tied to the installed base of BlackBerry devices, each one of which generates a few dollars every month for the company. But, if device shipments go down dramatically and existing BlackBerry users churn to other platforms, this service revenue will merely lag falling hardware revenues by a few quarters but generally follow the same path. BlackBerry has already stopped reporting subscriber numbers, which started falling late last year, and had dropped from 80 million to 72 million by the time BlackBerry closed the door on that metric.
