BlackBerry Rises on Profit Forecast After More Software Gains

BlackBerry Writes Down Inventory in Sales Miss
  • 2017 loss will be 15 cents a share; analysts expected 31 cents
  • Software revenue, a key focus, rose 21% from a year earlier

BlackBerry Ltd. rose as much as 4.6 percent after forecasting better-than-expected profit and insisting there was a way to make its ever-shrinking phone business profitable again.

Key Points

  • Fiscal-year adjusted loss will be 15 cents a share, compared with an estimated loss by analysts of 31 cents.
  • Fiscal first-quarter earnings per share, excluding some items, broke even, compared with analysts’ average estimate of a loss of 7 cents.
  • Revenue in the quarter was $424 million, including software and services revenue of $166 million that was 21 percent higher than the same period last year ($137 million). Analysts had estimated total revenue of $471 million.
  • BlackBerry changed its reporting structure to include revenue from both smartphone sales and licensing deals. The new unit -- “mobility solutions” -- accounted for 36 percent of revenue. The company sold 500,000 devices in the quarter, compared with 600,000 in the previous quarter.
  • Shares gained 2.4 percent to $6.90 at 9:57 a.m., after reaching as high as $7.05 in New York in Thursday.

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. While the company works on two more Android phones, including a cheaper option, Chen said he would slot some software sales into the smartphone unit. This would provide a way for that unit to achieve profitability even as the company sells fewer phones.

The Detail

  • A net loss in the quarter of $670 million reflected a $501 million impairment charge, a $57 million goodwill impairment charge and a $41 million writedown of inventory and other charges.
  • BlackBerry projected fiscal 2017 software and services revenue growth of 30 percent.
  • Service-access fee revenue will decline 20 percent 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 $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.”
Before it's here, it's on the Bloomberg Terminal. LEARN MORE