BlackBerry sees light at the end of the earnings tunnel

BlackBerry suffered another quarterly loss and continues to sell fewer smart phones. But thanks in part to layoffs and cost cutting says it is on the way to returning to profitability.

The company said this morning that for the three month period ending March 1 it had a loss of $423 million on revenue of $976 million. It sold 1.3 million smartphones compared to approximately 1.9 million in the previous quarter.
By comparison, it lost $4.4 billion (all numbers in $US) in the previous quarter.

And despite a range of devices using the advanced BlackBerry 10 operating system, the majority of its business is selling handsets running the older BB7 operating system.

During the fourth quarter, approximately 3.4 million BlackBerrys were sold through to end customers, which included shipments made and recognized prior to the fourth quarter. Of those, approximately 2.3 million were BlackBerry 7 devices.

But Chen told financial analysts during a conference call that there’s still a lot of customer demand for BB7 devices, so the company will start a new production run of handsets and will keep making them as long as there’s demand.

For those looking for a new handset on the BB10 platform, a low-cost Z3 is coming, first in Indonesia next month where it will be sold for about US$200 and then to India Thailand. But the big news is there will be an LTE version — likely costing more — that will be sold in rest of the world. Chen didn’t say, but that model will likely try to compete with lower-priced LTE handsets flooding the market.

And the Q30 –which Chen has named the Classic because it will have a trackball like BB7 devices — will be out likely in November.

Still, Chen said in a statement that the financial numbers were getting bright.

“I am very pleased with our progress and execution in fiscal Q4 against the strategy we laid out three months ago. We have significantly streamlined operations, allowing us to reach our expense reduction target one quarter ahead of schedule,” he said. “BlackBerry is on sounder financial footing today with a path to returning to growth and profitability.”

The company wants to get to  positive cash flow by the end of February, 2015 and profitability in 2016.

A look at how far the company has fallen is in the number for the 12 month period ending March 1. Revenue was $6.8 billion, down 38 per cent from $11.1 billion in the previous fiscal year. It lost $5.9 billion during the 12 month fiscal 2014, compared to $628 million for the same period the year before.

It had to write off $934 million of inventory from its Z10 smart phone, first introduced exactly a year ago.

One bright spot: The company’s adjusted gross margin on all fourth quarter was 43 per cent of revenue, up from 34 per cent in the previous quarter.

Chen told financial analysts on a conference call that he is “extremely pleased” with the results … “put us on track if not slightly ahead” of profitability plan.

One thing that did stick out in the call is that Chen expects enterprises are putting off buying BlackBerry Enterprise Service 10 (BES10), the device management platform needed to oversee BB10, Android, iOS and Windows Phone devices until the fall when BES12 is released. That version will allow enterprises to consolidate previous versions of BES — needed for BlackBerry 6 and 7 devices — into one platform. Right now organizations have to operate separate BES infrastructures. If enterprises hold off that means less revenue for the company.

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Jim Love, Chief Content Officer, IT World Canada

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Howard Solomon
Howard Solomon
Currently a freelance writer, I'm the former editor of and Computing Canada. An IT journalist since 1997, I've written for several of ITWC's sister publications including and Computer Dealer News. Before that I was a staff reporter at the Calgary Herald and the Brampton (Ont.) Daily Times. I can be reached at hsolomon [@]

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