Blackberry misses sales estimates after smartphone writedown
Key points
Fiscal first-quarter earnings per share, excluding some items, broke even, compared with analysts’ average estimate of a loss of 7 cents (RM0.28). Revenue in the quarter was US$424 million, including software and services revenue of US$166 million that was 21 per cent higher than the same period last year (US$137 million). Analysts had estimated total revenue of US$471 million. A net loss in the quarter of US$670 million reflected a US$501 million impairment charge, a US$57 million goodwill impairment charge and a US$41 million writedown of inventory and other charges. BlackBerry changed its reporting structure to include revenue from both smartphone sales and licensing deals. The new unit — “mobility solutions” — accounted for 36 per cent of revenue. The company sold 500,000 devices in the quarter, compared with 600,000 in the previous quarter. Shares gained 3 per cent to US$6.94 in early trading today.
The big picture
Chief Executive Officer John Chen is pushing to increase software sales while finding a way to wring profitability from the company’s shrinking smartphone division. Chen has said BlackBerry’s first Android phone, the keyboard-equipped Priv, didn’t sell as well as he had hoped because it was too expensive. The company is working on two more Android phones, including a cheaper option, but Chen has said he may cut the unit altogether in September if he can’t make it profitable.
The detail
Fiscal-year adjusted loss will be 15 cents a share, compared with an estimated loss by analysts of 31 cents. BlackBerry projected fiscal 2017 software and services revenue growth of 30 per cent. Service-access fee revenue will decline 20 per cent in the second quarter, Chief Financial Officer James Yersh said during an earnings call Thursday. The company closed the quarter with cash and cash equivalents of US$2.5 billion.
Street takeaways
If Chen can’t restore profitability to the handset unit, it’s “got to go,” said John Butler, an analyst with Bloomberg Intelligence. “This is a company who’s in the midst of a product transition right now. The device business is clearly not working. You really need that one device that resonates with consumers and does well.” “BlackBerry reported weak top-line numbers as both smartphone and service-access fee revenues were weaker than expected, and the company recorded significant write-downs and impairments,” JPMorgan Chase & Co. analyst Rod Hall said in a note. “However, software revenue was better than expected, and the company provided increased transparency and a better-than-expected FY’17 EPS guide.” — Bloomberg
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