Wall Street believes that BlackBerry (BBRY) will ship between 300,000 and 800,000 new BlackBerry Z10 smartphones during the February quarter. This is the most widely discussed number for BlackBerry’s fiscal fourth quarter, but it’s far from the most important metric. Since the Z10 was not shipping to the U.S. market and was available only in select countries for a fraction of the quarter, the Z10 shipment figure is going to be open to interpretation. Instead, the firm’s total subscriber base is the number that is going to be highly relevant. This is because in the August quarter, BlackBerry added 2 million net subscribers and in the November quarter, the company lost 1 million subscribers. Late autumn appeared to mark a dramatic turning point. The subscriber growth in emerging markets slowed down so much that it no longer was able to offset the base erosion in the U.S. and the U.K.
But what does that imply for the February quarter? BlackBerry swung from adding 2 million subs per quarter to losing 1 million subs in just three months. Does that mean that the subscriber base could shrink by 2-3 million in the February quarter? Or has the buzz around the Z10 given even the older models a psychological boost?
Wall Street is remarkably bad at estimating BlackBerry subscriber trends, largely because Africa and South-East Asia are tough markets to read. In the first half of 2012, analysts expected BlackBerry to deliver subscriber losses for its February and May quarters. The company kept on expanding its user base. By the November quarter, Wall Street sentiment had turned more positive and analysts started expecting that BlackBerry would add 300,000 subscribers. Of course, right then the BlackBerry trend turned on a dime and the quarter showed a big loss of 1 million subscribers.
What makes the February quarter so pivotal is that while the BlackBerry Z10 won’t move the actual subscriber number much, its psychological impact will be revealed. Let’s assume optimistically that BlackBerry managed to ship 700,000 new flagship phones and about half of the buyers came from competing operating systems. In this “Blue Skies” scenario, the new phone helps BlackBerry to expand its subscriber base by 350,000 customers.
Since BlackBerry lost 1 million subs in the previous quarter, that 350,000 is not going to turn the tide. Instead, we will get a sense of what is happening to the low-end Curve demand in emerging markets. Is the Curve demand erosion accelerating as low-end Android models with QWERTY keyboards proliferate and WhatsApp continues to undermine BBM? Or has the Z10’s media exposure helped BlackBerry to stabilize its budget device business?
If the BlackBerry subscriber base shrinks by less than 1 million, it will be an undeniable relief after the wildly negative swing between the August and November quarters. If the sub base shrinks by more than 2 million units, it means that BlackBerry has to rush out the new low-end models out ASAP or risk a summer collapse.
This is the central drama of BlackBerry’s upcoming February report.