BlackBerry results improve, but smartphone maker isn't clear of hurdles yet
DAVID FRIEND / THE CANADIAN PRESS
SEPTEMBER 26, 2014 01:00 AM
BlackBerry CEO John Chen shows off the new Passport device at it's launch in Toronto on Wednesday, September 24, 2014. THE CANADIAN PRESS/Chris Young
WATERLOO, Ont. - BlackBerry Ltd. (TSX:BB) hasn't forgotten about everyday smartphone users and, eventually, chief executive John Chen hopes to pursue their loyalty once again.
But the head of the Waterloo, Ont.,-based company says that
for now business customers will remain his priority.
"One thing at a time," Chen said during a media roundtable at BlackBerry's headquarters.
BlackBerry released its Passport device this week, a large smartphone aimed at the corporate market.
"I need to (recapture the base) of enterprise customers for this company to get back on track financially. I am by no means suggesting this is the only thing we're going to do," Chen said.
On Friday, the smartphone maker delivered a round of financial results that showed improvements, but suggested further challenges remain to be overcome as it pushes forward with its lumbering recovery.
BlackBerry, which keeps its books in U.S. dollars, lost US$207 million or 39 cents per share in its latest quarter, compared with a net loss of US$965 million or $1.84 per share a year earlier.
However, the company's adjusted loss amounted to two cents per share, when factoring in a restructuring charge and an adjustment related to its debentures. Analysts on average had expected loss of 16 cents, according to a survey by Thomson Reuters.
Sales in what was the company's second quarter dropped to $916 million, coming in short of analyst estimates of $950 million and below the $1.57 billion reported a year ago.
Much of the decline in sales came from lower services revenue for offerings like access to its secure enterprise servers.
During the quarter, the high-margin services revenue fell 18 per cent to $424 million from the previous quarter, and a more dramatic 42 per cent from the same time a year ago.
It's figures like these that show BlackBerry still has a lot of work to reclaim a stronghold on the business users that once loyally carried its devices.
Over the past year, BlackBerry has been squeezed from all angles by Chen, who stepped into the role with the goal of creating a leaner and profitable operation.
"When I came into this job everybody (said) if you don't repair the balance sheets this company's dead," Chen said.
"I hope everybody realizes we are well on our way to shoring up our balance sheets."
But the company is still in the first half of a two-year recovery period, and revenue may still have further to fall before it hits bottom, he said.
Chen has stuck to a goal of making the company break even on cash flow by February 2015, which is the end of the company's fiscal year.
Morningstar analyst Brian Colello remained cautious about the long-term demand for BlackBerry's products while complimenting the improvements the company has made through cost cutting.
"The much harder task, in our view, will be revitalizing demand for the company's handsets and converting software licensees to longtime paying customers," Colello said in a note.
In the meantime, Chen is making fundamental changes to how the company does business.
Already he has introduced the EZ Pass Program, which allows corporate users to hook its employees up to the same device management system, regardless of whether they're using a BlackBerry, iPhone or Android device.
The technology has been free since it was introduced earlier this year, but Chen intends to start charging users a subscription-based fee to remain on the system.
"I suspect when we're all said and done there will easily be 10 million subscriber licences," he said.
BlackBerry is also pushing a more secure version of its BlackBerry Messenger service to corporate customers that will incorporate additional features like money transfer and a virtual conference service called BBM Meetings for an extra cost.
Monetizing BBM has been a goal of BlackBerry for over a year, though it hasn't disclosed any sales figures yet.
Active users on the platform grew to 91 million in the quarter from 85 million, while Chen says he wants to eventually make the service generate $100 million of revenue in 2015.
The company said Friday that more than 200,000 of its new Passport model have been ordered since it was released on Wednesday.
Chen said that's given him enough confidence to move ahead with another iteration of the device that will hit the market sometime in the future.
BlackBerry is also working to phase out its popular Bold model that helped sustain sales during its most troubled days, while it will introduce the BlackBerry Classic later this year.
Another new device will be unveiled at the Mobile World Congress meeting in Barcelona in March.
The company is also hiring.
About 350 new employees will be hired by the company before the end of its fiscal year, primarily from a University of Waterloo engineering co-op program and fresh graduates.
It will be the first time the company has launched any sort of hiring spree since it gutted the 20,000 employee staff to its current level of about 7,000 people across the globe. About 3,500 BlackBerry employees still work in Canada, with most of them in the Waterloo region.
Shares of the company gained five per cent, or 56 cents per share, to close at $11.44 on the Toronto Stock Exchange on Friday.
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