BlackBerry is struggling for turnaround
Surprise operating loss and little news of make-or-break line
BLACKBERRY offered few signs of a long-promised turnaround on Friday, with an unexpected quarterly operating loss, a dearth of details on sales of its make-or-break new line of devices and no return to profit expected in the current quarter.
BlackBerry’s share price plunged about 28% in both US and Toronto trading.
The Canadian smartphone maker, which has struggled to compete with Apple’s iPhone, Samsung’s Galaxy phones and other devices powered by Google’s Android operating system, said smartphone sales were up 13% from the previous quarter, a period when buyers waited for the BB10 phones to hit the market.
But deliveries were down from a year ago as sales of its older line of BlackBerry devices tapered off.
“We haven’t received the BlackBerry 10 unit numbers yet, but certainly it doesn’t bode well for the initial BlackBerry 10 launch, particularly the Z10. Even the outlook for a Q2 loss doesn’t bode well for the Q10 either,” said Brian Colello, an analyst with Morningstar.
The company launched two all-new smartphones this year, the touch screen Z10 device, followed by the Q10, which includes the mini keyboard many BlackBerry users still covet. It also launched the Q5, a lower-end keyboard device targeted at emerging markets, and plans to unveil one more cheaper phone running on its old BlackBerry 7 platform later this year, hoping to stave off market share losses in price-sensitive emerging markets flooded with cheap Android devices.
BlackBerry invented the concept of on-the-go e-mail with clunky little devices with a mini keyboard. It offered levels of security that made the devices attractive to business, government and legal clients, but they are now moving to other devices and leaving BlackBerry chasing both a high-end and a low-end market.
“They’re not the high-end provider any more, they’re not Apple, they’re not the low-end provider, they’re not Nokia, so they are in the middle and they do relatively low volumes,” said Daniel Ernst, of Hudson Square Research in New York.
“It’s difficult to make great margins on that kind of volume, so I would say the outlook is quite negative then.”
Excluding one-off items such as the cost of job cuts, BlackBerry reported a loss from continuing operations of $67-million on revenue of $3.1-billion.
The company forecast an operating loss in the current quarter.
Chief executive Thorsten Heins cited the need for increased investment in a competitive environment.
The company has been consumed over the past year with developing the new phones and making sure they work, and the devices were not ready for the all-important holiday season at the end of last year.
The Z10 hit store shelves in the crucial US market only in late March, while the Q10 device reached the US only after the end of Black- Berry’s first quarter.
The Waterloo, Ontario-based company said it shipped 6.8 million smartphones in the quarter.
On a conference call, it said 40% of them, or 2.72 million devices, were BlackBerry 10 devices.
Analysts looked for shipments of about three million of the new phones.
It reported a net loss of $84-million in its first quarter to June 1. That compared with a year-earlier loss of $518-million.
BlackBerry did not give a detailed outlook for the rest of the year, saying the smartphone market remained highly competitive, making it hard to estimate units, revenue and levels of profitability. It would not supply subscriber numbers due to changes in its revenue model.