BlackBerry reported a disappointing first-quarter loss last week, putting a serious hitch in the company's comeback narrative as it fights to stay relevant in the competitive smartphone market.
The company has staked its future on luring BlackBerry customers back into the fold with a new operating system, BlackBerry 10, and phones with slick, modern features. But the early results were disappointing and sent the company's stock plummeting more than 27 percent.
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Only 2.7 million smartphones running its new system shipped this quarter -- far less than the 5 million in sales Apple's iPhone 5 logged in its opening weekend alone. Those results are even weak compared with smaller competitors such as Nokia, which shipped 5.6 million of its Lumia smartphones last quarter.
In a call with analysts, BlackBerry chief executive Thorsten Heins said the new phones launched in January and may need more time to build an audience. "One year ago, none of these products existed," Heins said. "Transition takes time."
BlackBerry reported that first-quarter revenue grew 15 percent to $3.1 million and that losses shrank to $84 million during the quarter. But analysts were expecting more revenue and for the company to turn a profit.
In the long term, BlackBerry has little chance of catching up to market leaders Google and Apple -- something the company itself has acknowledged. But even picking up the bronze medal may prove difficult, analysts said. It faces tough competition from Microsoft's Windows Phone platform for the position as the third-largest smartphone maker.
"If you're only going to bet on three, it's a tough proposition for BlackBerry to make that argument," said Stephen Baker, vice president of industry analysis for the NPD Group. Not only can Microsoft point consumers to ways its phones work with the firm's computers, tablets and software, the tech giant has the stability and resources to wage a long battle.
"Even if Microsoft isn't getting particularly successful in phones, they'll keep beating their head against the door," Baker said.
BlackBerry, on the other hand, is in a more delicate position. The company's subscriber base fell an additional 4 million to 72 million in the first quarter as buyers continue to leave the older BlackBerry 7 system. It has a loyal group of customers who prize security, but it is increasingly facing competitors who can offer security and cutting-edge features.
"There's a fundamental question here about how long BlackBerry can remain as this company that we recognize and know today as maker of handsets and provider of an operating system," said Charles Golvin, a technology analyst for Forrester Research.
Golvin suggested that BlackBerry is already focusing on providing software and infrastructure services, particularly those aimed at business and government customers, to find revenue outside of the hardware space.
"I don't think they're getting out of the hardware business," Golvin said. "I don't think they've indicated that. But they'll want to show they have other arms to bring to the battle."
Heins said as much during the call, highlighting such efforts as BlackBerry's plan to bring its BlackBerry messaging platform to competitors' devices by the end of the summer. "We don't plan to run the company with a short-term device-only strategy," he said.
"We don't have to be all things to all people in all markets."