John Paczkowski

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BlackBerry Subscriber Exodus Accelerates

ackroyd_julia_childFinancially, BlackBerry is back in the black, but when it comes to subscribers, the company is still bleeding red.

As encouraging as the smartphone maker’s surprise fourth-quarter profit might be, it’s clear the company faces some still-formidable challenges — particularly in shoring up its eroding subscriber base.

BlackBerry lost another three million subscribers in its latest quarter, with its customer base falling to 76 million subscribers. Until the third quarter, BlackBerry had posted subscriber increases fairly consistently. So the fact that it just posted a second consecutive decline — and one that was larger than expected — is cause for concern indeed.

Returning BlackBerry to its former glory is already a daunting task; pulling that off while subscriber numbers are declining only makes it more so. Obviously, BlackBerry subscribers are the most likely buyers of the company’s new BlackBerry 10 handsets, so an accelerating decline in their membership is troubling.

“The subscriber decline is actually slightly worse than it seems since it includes BlackBerry 10 subs that do not generate service revenue,” Raymond James analyst Tavis McCourt told AllThingsD. “BlackBerry is losing subscribers at a more rapid rate in emerging markets, which up until a year ago was still a source of rapid growth. That’s concerning as well.”

Morgan Stanley analyst Ehud Gelblum took a more pragmatic view of the decline, suggesting it was inevitable and, perhaps, not quite so worrisome.

“We’ve all known that sub number was going to start coming down,” Gelblum said. “The positive part that we only know now is that the subs they’re losing are mostly low-end prepaid subs who weren’t contributing much to the service revenue line and probably weren’t likely candidates to buy a Z10 in the first place.”

Appearing on CNBC on Thursday, BlackBerry CEO Thorsten Heins downplayed recent declines in subscriber numbers, saying that services revenue per subscriber is the more important metric and the one that the company is striving to increase.

“The decline in the subscriber numbers is really associated [with] the former BlackBerry OS system, so we expect this to gradually continue with [a] single digit [drop], probably, in the next quarter,” Heins said. “What we’re really working on, and what we’re looking toward, is new services based on BlackBerry 10, and then we will be looking at the monetary value of those services, rather than pure subscriber numbers.”

In other words, this is all part of BlackBerry’s transition to its new platform.

A fair point, I suppose, though it would certainly be more reassuring if the number of departures weren’t quite so large. Down three million subs in a single quarter is sharp erosion and doesn’t bode well for a company that’s struggling to reverse its market-share loss. That’s a number that is very clearly going in the wrong direction, and BlackBerry really needs to execute in the next quarter to stanch the bleeding.

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