Critical Analysis Paper: BlackBerry
According to the article “BlackBerry Posts Loss as Phones Go Unsold”, BlackBerry performs a poor performance. Business has a quarterly loss in 2013 for $965 million. The revenue had drop 45% that down to $1.57 billion from $2.86 billion compares with a year earlier. BlackBerry lost $248 million, or 47 cents a share, and analysts forecast 49 cents a share loss for the quarter ended August 31. The net loss is $235 million which excluding inventory charge and restructuring charges in the latest quarter. The cash position also down to $2.6 billion from $3.1 billion at quarter-end. Smartphone maker report a hefty operating loss of nearly $1 billion charge on inventory of unsold phones. Fairfax Financial Holdings to take the company private for about $4.7 billion, or $9 a share. As a former mobile king, BlackBerry faces to exit the handset business. This report will conduct a situation analysis of potential causes of declining sales and profits of Black Berry. And also would identify internal company and external environment for the poor performance.
A particular reason of the sales declining is BlackBerry cannot satisfy enough to the market and product demand for customers. Sales declining imply to revenues declining. BlackBerry recognized most phone’s revenue is from the older models, which means the new phones are not much attract to customers. Ian Austen (2013) noted that BlackBerry could soon be leaving the business of making phones—leaving fewer options for a vocal minority still committed to phones with its once popular physical keyboard. (para. 1) BlackBerry usually produces the keyboard models, but with people’s pursuit on phone, most smartphone users prefer to use touch-screen models instead of the physical keyboards. Keyboard was one of a special characteristic of BlackBerry, eventually, that become an obstacle for its evolution.
The reason of revenue declining of BlackBerry is it has a lower market share. BlackBerry has not change their product style and business strategy while customers are seeking the new products constantly, market share would be affected and would cause revenue going down. Joseph Palenchar (2013) noted that “the old days saw BlackBerry’s market share in global smartphone shipments peak in 2009 at 20% and fall to 5% in 2012, marking the company’s lowest level since 2003.” (para. 3) “Increase the chances that BlackBerry can regain some of its lost market share during the make-or-break year of 2013” (para. 9) Revenue is declining because the market is becoming smaller. With Apple, Samsung’s products are growing deeply in customers’ impression, BlackBerry is standing in the behind position compare with those two brands. BlackBerry is not enough strong to attract those Apple and Samsung’s customers to choose its products even they produce the new products.
A poor financial performance reflects BlackBerry Company is going down. In the article of “Company Overview”, the author stated a SWOT analysis of BlackBerry. In the weaknesses of company, the author described the revenues decreased primarily due to lower shipment volumes and lower average selling prices of hardware products. The company’s revenues declined from $19,907 million in FY2011 to $11,073 million in FY 2013. (p.6) Continuous decline impacts the company’s profits and margins. In 2013, RIM recorded the operating loss of $1,235 million compared with operation profit of $1,497 million and $4,636 million in 2012 and 2011. It also suffers a decline in the cash position which from $4,009 million in 2011 to $2,303 in 2013.
Substitutes and competitive also are the factors that affect BlackBerry suffer in this situation. The lower revenues will decrease market share so that to increase the competition. BlackBerry lack of innovation; however, its competitors of smartphone company such as Apple, Samsung, HTC, Microsoft, etc. are rapidly evolving. Most of them have larger customer bases, greater financial, sales and distribution than BlackBerry. As consumers, under an available circumstance of selecting, they prefer a product with innovation, creative, and satisfaction. Competitive pressure impact the company’s growth and market share.
Fairfax Financial Holdings is going to take the company private, but still won’t solve the company’s problems. BlackBerry still insist their employees of the same smartphones and tablets that use at home. It is losing in the consumer arena. Therefore, even though investors take it private, BlackBerry’s revenue still would not be changed because it did not change its operation of business.
The most primary reason for the company’s poor performance is BlackBerry lack of innovation. Because of BlackBerry did not change its strategy in order to satisfy customer’s demand for the smartphone, the product sales and revenues are going down. Also, the lower market share and the higher competition would impact BlackBerry’s profit and margin.
Connors, W. (2013). Blackberry posts loss as phones go unsold. Austen, I. (2013). Blackberry’s future in doubt, keyboard lovers bemoan their own. Palenchar, J. (2013). Analysts: Blackberry facing tough battle. (2013). Company overview.