waterfall

For a CEO whose company had been approaching a perilous brink, Thorsten Heins is looking pretty confident. Heins, who heads Research in Motion, appeared on CNBC Thursday to declare that the company has reached a “turnaround point” and that, despite a dramatic drop in subscribers, “we absolutely have a strong brand.” He said it in a monotone, as if he were the embodiment of “Keep calm and carry on.”

We’ll see. Credit Heins with this much, though: After several years yoked under a management style somewhere between complacency and deer-meets-headlights glare, Heins has brought BlackBerry (still legally named RIM, but they’d like you to call it BlackBerry, please) back from the brink. For the moment.

During Heins’ tenure, Blackberry has finally brought the long-delayed BlackBerry 10 operating system to market, pushed the stock price back near $15 a share from $6 a share last fall, and surprised Wall Street this past week with a 22-cents-a-share profit in the most recent quarter. Analysts had been expecting a loss of 31 cents.

While all of this represents no small accomplishment, it won’t be enough to stave off the inevitable. Heins is like a man swept by a river toward a steep waterfall, clutching a QWERTY keyboard and paddling like mad against the current. With hard work he’s moving back from the edge, but that doesn’t mean the current is getting any less powerful.

A surprise profit doesn’t make for a turnaround, and BlackBerry will need several strong quarters before it can win over skeptics. There were some alarming numbers in the earnings report as well. Revenue in the quarter fell 36 percent to $2.68 billion (analysts were looking for $2.84 billion.) And subscribers shrank by 3 million to 76 million, with most of the churn occurring in North America and Europe.

Bears focused on the drop in subscriptions, with RBC analyst Mark Sue noting that it implies “the world’s moving on as Blackberry tries to reverse its market-share loss.” In a conference call, Heins said the lost subscribers came from “pre-paid” subscribers and those using older Blackberry systems, and he indicated the BlackBerry 10 was likely to increase revenue per user.

So much is riding on the BlackBerry 10, which the company announced in late 2011 before seeing its launch date delayed multiple times, while Android manufacturers like Samsung expanded their market share and other companies like Microsoft brought out their own revamped mobile OS offerings.

Will the new BlackBerry 10 devices make for a real, durable turnaround? To find out, we will need to wait at least another quarter. For now, there is evidence to support both bulls and bears. Heins boast that the company shipped 1 million BlackBerry 10 units in the last few weeks of the quarter. On the one hand, BlackBerry 10 shipments have been encouragingly high so far. On the other, they are below some initial estimates of 1.75 million shipments. And there is still the question of how many shipped units translated into sales.

Then there is that generous single customer that placed the largest single order in Blackberry’s history for another million phones to ship this quarter. Blackberry made a big deal of that massive shipment and Heins touted it again in the earnings call. But it’s looking like Mr. Big Buyer was a Miami-based mobile distributor, perhaps used by Verizon to offload inventory risk of the new phone.

Even as Goldman Sachs gives BlackBerry a one-in-five chance of succeeding, there is still reason to hope that it’s not all over for BlackBerry. The company is aiming to offset declining subscribers with an aggressive marketing campaign this quarter. And it may not pay to underestimate the longstanding loyalty of many BlackBerry users. Some of the mad love for its bubbly keyboards can be found in unlikely places.

Still, it would be dangerous to read too much into a single quarter’s worth of strong profits, or Heins’ blithe sense of confidence. Cost-cutting and the higher-priced BlackBerry 10 may be pushing up gross profits, but Blackberrys remain niche products in what is probably the most competitive sector in all of technology today. A good smartphone is not good enough to succeed. There is no shortage of good mobile operating systems.

In a competitive market where price is becoming a more important factor, consolidation is inevitable. BlackBerry 10 may save the company in a way Heins isn’t talking about much: It could make it a more attractive acquisition for a manufacturer in need of a distinctive operating system.

A few weeks ago, Lenovo’s CEO triggered a brief rally in BlackBerry’s shares when he named the company as a potential merger candidate. Analysts were quick to argue that the deal wouldn’t make sense financially, although strategically it makes sense. If Heins does manage to pull his company out of the river before that waterfall, he’ll likely need the help of a successful partner that is securely on dry land.

(Photo courtesy of Flickr user Massimo Margagnoni.)