BlackBerry Q1: $23 million in profit, beats analyst expectations
BlackBerry is in the midst of turning from hardware to services, and the restructuring appears to be fruitful. The company still experienced losses in Q1, but the financial result is not as bad as expected.
BlackBerry reported on Thursday Q1 2014 net income of $23 million with earnings of $0.04 per share, in comparison with a loss of $84 million — 16 cents a share — a year earlier. (statement)
The ailing handset maker, which is in the midst of restructuring efforts aimed at turning the company's fortunes around, reported a lower-than-expected adjusted loss, excluding restructuring charges and a singular non-cash accounting gain due to adjustments in the fair value of debentures within the company. In total, the loss was $60 million, or $0.11 a share.
Revenue for the first quarter was $966 million, down $10 million quarter-on-quarter and from $3.07 billion in the previous year. The revenue breakdown for Q1 was approximately 39 percent for hardware, 54 percent for services and 7 percent for software and other revenue streams.
Roughly 2.6 million BlackBerry smartphones were sold through to end customers during the three months ending May 31 2014, a steep drop from 3.4 million in Q4 2013.
BlackBerry chief and executive chairman John Chen said in prepared remarks:
Our performance in fiscal Q1 demonstrates that we are firmly on track to achieve important milestones, including our financial objectives and delivering a strong product portfolio. Over the past six months, we have focused on improving efficiency in all aspects of our operations to drive cost reductions and margin improvement. Looking forward, we are focusing on our growth plan to enable our return to profitability.
Revenue by region is below:
Despite dwindling handset sales, the BlackBerry chief denied reports that the company would sell its handset business, and Chen said he was "still working on a way to make money in the handset business." Chen believes that the key to winning and keeping enterprise customers is to maintain both handset and services divisions, in order to offer customers an end-solution which encompasses both elements.
In BlackBerry's first quarter earnings conference call, Chen said that "significant progress" had been made in "returning BlackBerry to growth and profit." In addition, the executive said that Q1 revealed "stabilization and improvement in all areas."
On Wednesday, BlackBerry announced that the Amazon Appstore will be available on BlackBerry 10 phones starting this fall. When asked how BlackBerry would encourage developers to support the platform, Chen said on the conference call that enterprise app developers were "very keen" to work with the company, due to the security-based nature of BlackBerry components — and the firm's Internet of Things vision was a bonus.
Chen said with the clasping of hands on the Amazon-BlackBerry deal, he "liked to think everyone wins in this." Users have access to the store, Amazon gains additional subscribers and searches, and most importantly, "I don't have to spend money on the consumer side," according to Chen.
This, in turn, frees up BlackBerry to focus on the enterprise market.
On the earnings call, Chen also confirmed the leaked "windmere" smartphone will be launched in September. Dubbed the BlackBerry Passport, the smartphone is equipped with a QWERTY keyboard and is as wide as its namesake.
BlackBerry hopes to reach break-even cash flow results by the end of the 2015 fiscal year, with a target of rising to profitability in its 2016 financial year. Chen said the company is "on track," and "we feel good about where we are and what it will take to get back to profitability." The executive admitted that saying the firm could lure every past customer back to the BlackBerry fold and away from competitors would be an "exaggerated statement," but in some cases, market leaders were willing to work with BlackBerry's new approach, and "quarters like this can return confidence in us."