BlackBerry's Surprising Profit Doesn't Signal a Comeback

Blackberry CEO Thorsten Heins Photograph by Scott Eells/Bloomberg

Today BlackBerry announced a surprising fourth-quarter profit of $98 million. A year earlier, the company lost $125 million over the same period.

The rare bit of good news for the Canadian tech giant comes at a crucial time for the company. Earlier this year, after a series of disheartening delays and setbacks, BlackBerry finally began rolling out its new BlackBerry 10 series of phones based on its all-important new mobile operating system—the success or failure of which is likely to determine the fate of the struggling company.

March 28 (Bloomberg) -- Bloomberg's Jon Erlichman reports on BlackBerry's earnings. He speaks on Bloomberg Television's "In The Loop." (Source: Bloomberg)

Given the timing, it’s tempting to see BlackBerry’s sudden return to profitability as evidence of a broader comeback driven by strong demand for the new line of phones. But in fact, the BB10 phones have little to do with it. The smartphones’ staggered rollout began in the U.K. on Jan. 31, then moved on to Canada, Asia, and Europe. The new line of phones arrived in the U.S. on March 22—several weeks after the company’s fourth quarter ended.

In reality, BlackBerry’s return to profitability is a result not of a hot new product but rather of Chief Executive Thorsten Heins‘s cool-minded cost-cutting efforts. When Heins took over as CEO in January 2012, he identified organization inefficiency as a major problem facing the company, which had grown so fast (from $300 million of revenue in fiscal 2003 to $3 billion in 2007) that projects had proliferated out of control.

Heins has since eliminated 5,000 workers and shuttered several manufacturing sites. Along the way, he has managed to achieve a profitable quarter even as overall revenue dropped 36 percent from the previous year.

In terms of the much debated question of the company’s future viability, little has changed. BlackBerry still needs a hit smartphone.

“Management is doing a good job operationally, but their ultimate success will be judged on the acceptance of BB10,” Ittai Kidron and George Iwanyc of Oppenheimer wrote today. “Here the verdict is clearly still out.”

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