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Did BlackBerry Ltd. Really Only Sell 8,000 Classic and Passport Phones This Quarter?

When BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) launched the Passport phone last fall, there was plenty of fanfare. CEO John Chen did his part, saying “I have to tell you, I just fell in love with the phone when I came in.” The first batch of 200,000 units sold out in just six hours.

Likewise, the Classic phone had a lot of promise. It was meant to give BlackBerry diehards what they wanted most—the QWERTY keyboard, the “belt” of shortcut keys, several shortcut tasks, and of course, a very long battery life. It also has an improved screen, better camera, and faster browser than the Bold. North American pre-order inventory sold out in December.

For his part, Morgan Stanley analyst James Faucette predicted that BlackBerry would sell 8 million devices this fiscal year—about the same as last year.

Not anywhere close

Today the story is very different. According to a report by Mr. Faucette released Monday, BlackBerry has only sold 8,000 Classic and Passport phones this quarter. This is well below the 2-3 million needed in FY2016 to reach projections.

At this point, BlackBerry is unable to respond to Mr. Faucette’s report. The company is in its “quiet period,” during which it can’t give any hints about its quarterly results. Its silence will be broken on Friday morning.

If Mr. Faucette’s report is true, then this would be an extreme disappointment. To put this in perspective, it took Samsung less than 15 minutes (on average) to sell that many phones last quarter. Even if BlackBerry’s Classic and Passport sales are triple what Mr. Faucette estimates, it’s a big disappointment.

What does this mean?

First of all, BlackBerry is not the same company it was two years ago. It has outsourced manufacturing to Foxconn, and shifted its focus towards software. If a phone doesn’t sell well, you won’t see massive inventory write-downs or big cash outflows.

That said, this report is still extremely troubling because it calls BlackBerry’s brand into question. In other words, it signals that former customers have given up on the company. Even large enterprises, which have been BlackBerry’s bread and butter, have been a “hard sell.”

If BlackBerry’s brand is indeed beyond repair, then software sales will almost certainly fall. Indeed, we have seen reports of this, and not just from Mr. Faucette. Analysts at Goldman Sachs and Imperial Capital each believe software sales are falling short.

In any case, we’ll get a much better idea on Friday. Until then, I would be really worried as a BlackBerry shareholder. I normally don’t advise selling stock just because of a bad quarter, but this calls the company’s long-term prospects into question too. BlackBerry shareholders, be warned.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair has no position in any stocks mentioned.

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