Thursday, June 19, 2014

Resurrection - BlackBerry Back in Business after Q1 Results

Though BlackBerry Ltd did not post huge profits in the results announced in the Q1, but for a company that was almost sold off half a year ago did post a lot narrower than the expected loss. With John Chen at helm, BlackBerry's turnaround efforts have started to pay off with some analysts hoping that Chen can drive the company to steady profits.

Stock also reflected the same after the Q1 results for BlackBerry were announced as the shares jumped more than 10% on Thursday. BlackBerry reported that it spent less cash than many expected and its gross profit margin rose from a year earlier.

Another positive that was announced in the meetup was its lower cost Z3, which was selling well in Indonesia and its services business, which manages its own and rival mobile devices on the internal networks of large organizations, had won back some customers.

"If we ship 10 million phones in a year, we'll be profitable on phones" Chen reportedly said. He wants to remain a competitor in the smartphone segment, but he is focused on BlackBerry's services business, which made up 54% of revenue in the fiscal first quarter, up from 26% only a year earlier.

There are also some early signs of recovery in BlackBerry's hard-hit smartphone business. Chen was excited about the Z3, which was launched in Indonesia earlier this year. He said demand was strong and inventory has run low at some points. The Z3 is also ready to be launched in India on June 25 at a lucrative price of under 12,000. BlackBerry Z3 was the result of the partnership which was forged last year with Foxconn, which allowed BlackBerry to reduce the cost of its hardware. As part of this deal BlackBerry no longer pays the full upfront costs for parts used in its devices and instead, Foxconn, the trading name of Hon Hai Precision Industry, takes a share of profits on each device in return for the risk of inventory management.


BlackBerry drew down $255 million in cash in the period, much less than the $784 million it used in the fiscal fourth quarter.

Gross profit margin rose to 46.7% in the fiscal first quarter to May 31, from 33.9% a year earlier.

"All areas of our business are making very good progress," said Chen on the call. "Financial objectives are on track, and strategy is on track, and the bottom line is we feel good about where we are."

The Waterloo, Ontario-based company reported net income of $23 million, or 4 cents a share, compared with a loss of $84 million, or 16 cents, a year earlier.

Excluding a one-time non-cash accounting gain and certain restructuring charges, the loss was $60 million, or 11 cents a share. Analysts, on average, had expected a loss of 25 cents a share, according to Thomson Reuters I/B/E/S. Quarterly revenue dropped to $966 million from $3.07 billion a year earlier.

Cash rose to $3.1 billion from $2.7 billion on a sequential basis, helped by the sale of real estate assets and a tax refund.

BlackBerry's Nasdaq-listed shares rose 13.2 percent to $9.39.

Official Press Release

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