(Adds CEO comment on revenue, market reaction)
By Euan Rocha and Allison Martell
TORONTO, March 28 BlackBerry Ltd
reported a smaller-than-expected loss on Friday as new chief
executive John Chen slashed costs, but a 64 percent drop in
revenue underscored the challenge Chen faces in turning around
the struggling smartphone maker.
The Canadian company, which has lost most of the smartphone
market to Apple Inc's iPhone and gadgets powered by
Google Inc's Android operating system, has laid off
thousands and agreed to sell most of its real estate.
Chen said he expects to be cash flow positive or neutral by
the end of the current fiscal year, which runs to early March
2015. He does not expect to turn a profit until sometime in the
following fiscal year. At a round table with media on Friday
afternoon, Chen said he also does not expect revenue growth
until some time that fiscal year.
"John Chen did what John Chen is known for. He came in and
he's cut the cost base," said BGC Partners technology analyst
Colin Gillis, who noted the company's "precipitous" revenue
drop. "He's buying himself some time."
Research and development expenses fell 24 percent in the
fourth quarter from a year earlier, while selling, marketing and
administration costs dropped 35 percent.
Shares of BlackBerry, whose share of the global smartphone
market was below 1 percent at the end of 2013, rose in early
trading but closed down 7.1 percent at $8.41.
BlackBerry's Nasdaq-listed shares were trading above $60 in
early 2011 but dropped sharply that year, and have not risen
above $20 since.
Morningstar analyst Brian Colello said BlackBerry's
operating expense reductions were encouraging, to a point.
"The big question still remains what BlackBerry can do on
the demand side," he said. "A lot of their moves have been
supply related and internal, but we're still looking for strong
signs that demand is improving."
Under Chen, the Waterloo, Ontario-based company is focusing
on its services arm, which manages mobile devices on the
internal networks of big clients.
The share of BlackBerry's revenue from hardware continued to
decline in the quarter, to 37 percent from 40 percent in the
third quarter and 61 percent in the fourth quarter of last year.
Ross Healy, a portfolio manager at MacNicol & Associates,
which has a small stake in the company, said BlackBerry is
becoming a more attractive acquisition target.
"You can't cut your way to revenue, but what you can cut
your way to is profitability," he said.
BACK TO THE FUTURE
The company's newer BlackBerry 10 phones have not lived up
to high expectations, and after heavily promoting several
devices with touch-screen keyboards, it is returning to its
roots, emphasizing the physical keyboards its most loyal fans
Last month BlackBerry unveiled a new "classic" model with a
keyboard. Chen told Reuters in an interview that BlackBerry was
designing three new keyboard-centric devices and would probably
introduce them in the next 18 months.
On Friday's conference call, Chen said the company was set
to begin a new production run of its Bold devices that run on
the older BlackBerry 7 platform as demand for them remains
The company said it had recognized hardware revenue on about
1.3 million BlackBerry smartphones during the fourth quarter,
compared with about 1.9 million devices in the third quarter.
It also said about 3.4 million devices were sold through to
end customers, and this included shipments made and recognized
before the fourth quarter. The company said 68 percent of these
devices were BlackBerry 7.
Its net loss was $423 million, or 80 cents a share, for the
fourth quarter ended March 1. That compared with a year-earlier
profit of $98 million, or 19 cents a share.
Revenue fell to $976 million from $2.68 billion. Analysts on
average had expected $1.11 billion, according to Thomson Reuters
Excluding restructuring charges and other one-time items,
the company reported a loss of 8 cents a share. The analysts'
average estimate was a loss of 55 cents.
(Additional reporting by Leah Schnurr in Toronto; Editing by
Chizu Nomiyama, Jeffrey Hodgson, Sophie Hares, Meredith
Mazzilli; and Peter Galloway)