BlackBerry CEO Says Worst Is Over After Posting Wider Loss

BlackBerry CEO Sees Revenue 'Uptick' Next Two Quarters
  • Revenue plummeted but will now start growing, CEO Chen said
  • Shares fall as quarterly phone shipments slump to 800,000

BlackBerry Ltd. Chief Executive Officer John Chen said the company has found the low-point of its turnaround after second-quarter revenue plummeted and smartphone shipments hit their lowest since at least 2007.

The shares slumped as much as 8.1 percent after the Waterloo, Ontario-based company reported a wider loss than analysts anticipated in the period ended Aug. 29.

Chen reiterated to investors he’ll bring in $500 million in software revenue by March 2016 and vowed to stabilize shrinking device sales with the help of a new phone, called the “Priv,” that runs Google Inc.’s Android operating system. Total revenue will rise slightly next quarter, the CEO said on a conference call Friday.

The chief executive has been working to transform BlackBerry from the shrinking smartphone maker he inherited two years ago into a leading provider of security software for businesses. Revenue has continued to drop quarter after quarter even as Chen managed to post profits earlier this year by cutting costs. With smartphone sales still accounting for about 40 percent of revenue, the company has continued to announce new devices.

By changing operating systems, Chen is betting that combining BlackBerry’s reputation for security with Android’s huge market will stop losses from BlackBerry’s device division and allow the company to focus more on developing its software products. The name “Priv” is a reference to BlackBerry’s focus on protecting consumers’ privacy.

“This phone is the answer for former BlackBerry users who miss the physical keyboard but also need apps,” Chen said.

BlackBerry earlier posted a quarterly loss of 13 cents per share, excluding some items. Analysts had projected a loss of 9 cents a share, the average of 22 estimates compiled by Bloomberg. Revenue dropped 47 percent to $490 million. Chen said in March revenue wouldn’t fall below $500 million during the turnaround.

The shares declined 6.3 percent to $6.59 at 2:48 p.m. in New York. Through Thursday, they had dropped 36 percent.

Smartphone sales could use a shot in the arm. BlackBerry shipped 800,000 phones in the quarter, the lowest in at least eight years, according to data gathered by Bloomberg.

“The device business, I would say, is not dead yet but in bad shape. Eight hundred thousand units is really nothing,” said John Butler, senior handsets analyst at Bloomberg Intelligence.

If BlackBerry sees success with the Android phone, it might choose to cut its own operating system altogether, Butler said.

“If that effort proves successful and the devices resonate with the core customer base they’ve always gone after, which is government and enterprise, then what’s the rational for sticking with a proprietary operating system with no apps?,” he said.

BlackBerry needs to keep its own operating system because its most important customers -- governments from the U.S., Canada and Germany -- demand the security it offers, CEO Chen said.

“When they do catch up I will present that as a choice to the customer, I don’t think the customer will care then,” Chen said.

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