BlackBerry Turnaround Effort Hits Bump in Third Quarter

Company Generated Cash Earlier Than Expected, but Revenue Fell Short

Published on .

BlackBerry Ltd. reported fiscal third-quarter revenue that fell well short of analysts' estimates, overshadowing the company's milestone achievement of generating cash earlier than promised.

Revenue dropped 34% to $793 million in the three months ended Nov. 29, missing analysts' estimates for $931 million. BlackBerry shares fell 5.6% to $9.51 at 9:54 a.m. New York time. Earlier, the stock plunged as much as 9.6% for the biggest intraday drop since July.

The Passport
The Passport

On a conference call with analysts today, Chief Executive Officer John Chen said revenue in the quarter was "not satisfying" and that he needs another couple of quarters before sales will rise. "Now we'll turn our attention to revenue," he said.

BlackBerry generated positive cash flow of $43 million, a quarter earlier than promised, and posted an adjusted profit of 1 cent a share as Chen's turnaround strategy starts to come to fruition. Chen has said that his goals were to reach break-even cash flow by the end of this fiscal year and then return to sustainable profit and revenue growth next year.

Colin Gillis, an analyst with BGC Partners in New York, said while the stock is down today because of the revenue miss, it shouldn't distract from the company reaching positive cash flow.

"You're able to turn a profit, you're able to generate cash on a much lower revenue number this quarter, what's going to happen when your revenue number goes up next quarter?" Mr. Gillis said in a phone interview.

Since taking over last year, Chen has focused on providing software and security for governments and corporations, while also introducing new phones that cater to business users, like the Passport and the Classic, which was introduced on Wednesday.

The Waterloo, Ontario-based company recognized revenue on about 2 million smartphones, down from 2.1 million in the second quarter. It was the first quarter that customers could buy the square-screened Passport, which debuted in September. The week the phone was introduced, Mr. Chen said the company had pre-sold 200,000 Passports.

Mr. Chen said today that orders for the Classic are higher than orders were for the Passport at the start.

Today, Mr. Chen said the company is still on track to double software revenue by next year.

BlackBerry posted earnings of 1 cent a share, excluding some items, the first adjusted profit in seven quarters. Analysts on average had estimated a loss of 5 cents a share, according to data compiled by Bloomberg.

The company reported a net loss of $148 million, or 28 cents a share, compared with a loss of $4.4 billion, or $8.37 a share, a year earlier. BlackBerry ended the quarter with $3.1 billion in cash and equivalents.

--Bloomberg News

Most Popular