It looks like BlackBerry (BBRY) is running out of ideas. Management of the beleaguered smartphone company had boldly projected back in 2014 that its Indian operations will be a key growth driver for its entire business. But the ambitious plan appears to be far from materializing. As per the data points available to us, there is a reason to believe that BlackBerry India’s handset sales have dropped to extremely low levels. How does this impact BlackBerry’s business and its shareholders going forward?

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Import Data

Let me start by saying that none of BlackBerry’s handsets are produced in India. The company imports its entire portfolio of handsets from manufacturing destinations abroad, such as Mexico and China. This import data, in turn, is published online by Zauba.com on a daily basis which makes it easier for us to track BlackBerry’s Indian-bound shipment volumes.

These numbers do not mean much when considered in isolation. But tracking BlackBerry India’s import trends over a period of time does provide us with some valuable insights about its sales performance. After all, sales of any product is generally correlated to its inventory and shipment volume. For instance, if a product is doing well in terms of sales, we’ll either see its import quantities rising over a period of time or it would run out of stock. Obviously, sales can’t be more than imported inventory levels.

(Source: Zauba.com)

Let me shed more light in this context. The table above illustrates that BlackBerry India’s import quantities have declined substantially for almost every device. Products such as Z3, Q5 and Z10 that were designed exclusively for emerging markets are being imported in minuscule quantities.

The drop in these imports can be attributed to the following:

• BlackBerry Global might be running low on inventory,
• BlackBerry India might have been ranked low on the inventory allocation list,
• Devices could be actually struggling in sales.

Clearly the first two bullets are incorrect in this context. There haven’t been any reports from anywhere across the globe suggesting that BlackBerry is low on handset inventory. Also, after making bold statements about India’s massive projected role in its global turnaround, I doubt if the country would be ranked low in BlackBerry’s global inventory allocation order. Hence, I’m inclined to say that BlackBerry India’s imports have dropped primarily due to poor sales and not due to inventory issues.

The primary purpose of launching Z3 and Q5 was to get BlackBerry some traction in markets such as India and Indonesia, but import quantities shown above clearly reveal that the plan has failed to materialize. Even imports of it’s latest Passport have dropped significantly over the last few months. The situation is looking very bleak for BlackBerry India overall; this kind of a scenario usually plays out when a company is unable to convert its inventory into actual sales. So what does this mean for shareholders?

How does this impact investors?

BlackBerry could never fully enter the Chinese market over security concerns. Management was hoping that its Indian arm would make up for the lost opportunity, but things have obviously not gone as per the original plan. BlackBerry India generated just $11.2 million revenue and $0.85 million profit over the last fiscal year, and gauging by the import trends, FY16 financials of its Indian arm would only worsen.

India is the world’s second largest smartphone market in the world and I don’t think selling a few thousand handsets or generating $10-15 million in sales there will make any meaningful contribution to BlackBerry’s overall turnaround. Clearly India is not the market that BlackBerry hoped it would be.

Devices such as Z3 and Z10 were launched specifically for middle-income consumers of emerging markets such as India. But the devices are being imported in minuscule quantities and yet the smartphone vendor isn’t discontinuing the products. This adds to the overall expenditures as keeping the manufacturing lines open for each device requires a separate set of fixed costs.

Putting it all together

I strongly believe that BlackBerry should either ditch its handset business, discontinue devices that aren’t selling well or make a serious effort to launch new devices to reinvigorate its handset sales. Otherwise, it’s equivalent to just kicking the can.

For now, though, BlackBerry’s Indian dream appears to be crippled, if not dead. Things have obviously not gone as per the management’s ambitious plan which is why I suggest investors to remove the projected contribution of BlackBerry India from their financials forecasts of FY16 and beyond.