BlackBerry posts surprise profit, but subscribers slip

Thu Mar 28, 2013 1:45pm EDT
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By Euan Rocha

TORONTO (Reuters) - BlackBerry reported a surprise quarterly profit on Thursday after shipping 1 million new Z10 smartphones, but the Canadian company still fell short of convincing markets that its turnaround plan is already a runaway success.

BlackBerry shares were up 2.3 percent at midday on the Nasdaq, down from their 10 percent gain immediately after the results came out.

Expressing lingering doubts, some analysts focused on a decline in the company's subscriber base, a potential threat to its long-term growth prospects and turnaround plans. Others, however, zeroed in on strong sales of the new touchscreen Z10 device, which BlackBerry started rolling out at the end of January.

"I think the one million units is a nice start," said Morningstar analyst Brian Colello. "I think the encouraging thing is that BlackBerry was still able to sell a good portion of older models and generate solid service revenue during the transition. I think that will be important in terms of cash balance and profitability."

The well-reviewed Z10 smartphone is the first in a line of devices that will be powered by the new BlackBerry 10 operating system. It is a key plank in the company's attempt to regain relevance and win back market share in the smartphone arena it once dominated.

In a positive sign, BlackBerry said roughly 55 percent of the buyers of the Z10 were coming from other platforms - news that should allay fears that BlackBerry would be unable to attract users who have never used one of the company's devices, or who have abandoned BlackBerry in favor of Apple's iPhone and smartphones using Google's Android software, or other platforms.

The results offered solace to both bulls and bears on BlackBerry, which virtually invented on-your-hip email before ceding ground to rivals.

Some analysts noted that the company's quarterly revenue missed expectations and fretted about the decline in subscriber numbers to 76 million from 79 million during the fourth quarter.   Continued...

A new Blackberry Z10 smartphone is displayed at a store in New York, March 22, 2013. REUTERS/Brendan McDermid