BlackBerry's Android bet is still looking for its big payoff

The first Android smartphone from BlackBerry is making waves, but it hasn't yet shown it'll be enough to keep afloat the handset business of the once mighty smartphone maker.

Marguerite Reardon Former senior reporter
Marguerite Reardon started as a CNET News reporter in 2004, covering cellphone services, broadband, citywide Wi-Fi, the Net neutrality debate and the consolidation of the phone companies.
Marguerite Reardon
3 min read

A lot hinges upon the success of BlackBerry's newest smartphone, the awkwardly named Priv.

The company's first phone to run Google's Android mobile software, and not its own BlackBerry 10 operating system, represents a make-or-break moment. If the Priv fails to turn enough heads, that could spell the end of BlackBerry as a smartphone maker. It's a grim thought for the few of you who are still into BlackBerrys.

With only a few weeks of sales behind it, the BlackBerry Priv seems to be off to a good start. The device, which retails for $700, reportedly sold out on Amazon a few hours after the company launched it. There are also reports that it has sold out online at major retailers Walmart and Best Buy.

With its quarterly earnings report Friday, BlackBerry offered its own first hint on the progress of its marquee smartphone.

"The initial 30 days of sales has been quite positive," BlackBerry CEO John Chen said during a conference call with investors. "I don't want to overhype things. It's an expensive phone."

BlackBerry's core audience of government agencies and big corporate customers, Chen said, is still very interested in its product plans. The Priv, with its focus on security and privacy, speaks directly to that audience.

BlackBerry didn't break out specific sales numbers for the Priv. With only a month of sales behind it, though, the device likely hasn't yet had a major effect on overall device sales. The company reported during its conference call that it sold a total of 700,000 handsets in the quarter, about half the number it sold during the same quarter a year ago. That's also a decline from the 800,000 devices sold in the third quarter. The company said the average sale price of these devices was higher this year: $315, compared to $240 last year.

Chen said he's confident that Priv sales will continue to ramp up. At launch in November, the Priv was available in only four markets, with just one carrier for it in the US. By the end of February, it will be available in 31 markets, Chen said. The device will also likely be available through US carriers beyond just AT&T. The company is also talking to large corporate and government customers about selling directly to them.

Thanks to strong sales in its software business, BlackBerry beat earnings and revenue expectations with a reported loss of 3 cents per share on $557 million in revenue. Analysts had expected the company to post a loss of 14 cents a share on $490 million in revenue, according to Yahoo Finance.

The stakes are high. Chen has repeatedly said he'll dump the smartphone business if it doesn't turn a profit. To move into the black, BlackBerry will have to sell 5 million smartphones next year. That's a tall order considering the weak device sales the Waterloo, Canada-based company continues to report.

If any BlackBerry device has a chance to make a sales dent, it's the Priv. The Android-powered smartphone combines the company's strength in security and corporate email with Google's more widely adopted operating system and breadth of apps. This could give it the differentiation it needs to go up against a crowded field of Android devices from companies such as Samsung, HTC and LG.

Chen said the company's strategy to add value on top of Android looks promising. The company, he said, is within "shouting distance" of breaking even, which is the start to creating a profitable business. He believes the company's device business could break even within the next two quarters.

"We are in that ballpark now," Chen said. "Maybe next quarter, maybe a quarter later."

Shares rose more than 4 percent to $8.16 in early trading.