BlackBerry chief executive John Chen is understandably frustrated by the avalanche of negative reaction to the smartphone company’s latest quarterly results, which he says are within the boundaries of the plan he has outlined for months.
“They’re not listening to what I said,” Chen told a roundtable of reporters Friday from the company’s head office in Waterloo, Ontario, after posting third-quarter financial results.
He also said in a rather tongue in cheek way “They're giving me credit for being more of a super-human being than I really am.”
Chen, who was brought in a little over a year ago to turnaround BlackBerry, targeted the investment community, saying analysts boosted their expectations for BlackBerry’s revenue even after he told them in no uncertain terms that revenue had not bottomed yet.
“We told them that this quarter the revenue would be lower, and none of them listened — they jacked their revenue up,” he said. He went on to say “There’s a level of frustration on our part that they don’t understand the steps we have to go through to strengthen the balance sheets.”
During the earnings report, BlackBerry Ltd. delivered a financial report showing progress was being made in improving the bottom line. But investors focused mainly on the drop in the company’s revenue.
Shares of the company dropped as much as 10 per cent shortly after the results were released, recovering some of the decline later in the day.
In the third quarter, BlackBerry posted US$793 million in revenue, versus analyst predictions of US$931 million. This was an unreasonable expectation considering the well published fact that BIS subscriber figures are heading down as the legacy devices are decommissioned. Chens plan has been to replace legacy subscriber revenue with software revenue from services such as BES12 licensing. The monetisation of BES12/10 will not kick in until the EZ pass program is complete. This income will not begin to bite for at least two more quarters.
Net losses were narrowed to US$148 million, equivalent to 28 cents per share, compared with a far deeper loss of US$4.4 billion or US$8.39 per share in the same period a year ago. This remarkable feat of reorganisation has not been properly recognised, neither is the fact that against all the odds, the handset division is now a profitable part of the BlackBerry business.
On an adjusted basis, the company delivered a small profit of $6 million, or one cent per share, beating expectations of an adjusted loss of five cents per share, according to data compiled by Thomson Reuters.
BlackBerry recognized revenue on 1.9 million devices in the quarter, which compared with 2.1 million phones sold during the second quarter, however this revenue did not take account of the bulk of Passport sales that were counted in the latter part of the last quarter
During the period, 46 per cent of revenue came from phones, while another 46 per cent was from services it offers and eight per cent from software.
Chen aims to double its revenues from software in its next financial year, starting in March, helped by the launch of the next generation of its BlackBerry Enterprise Service software, BES12.
Earlier this week, BlackBerry launched the Classic model, an updated version of the best of the old handsets, the Bold 9900. This time around the retro styled Classic Bold is running the most modern and powerful operating system available for a smartphone, BlackBerry OS10.3
Chen told analysts that early order’s for the Classic “are ahead” of the Passport smartphone that was released three months ago. While Chen didn’t provide sales figures for the Classic, about 200,000 Passport phones had been sold in its first few days of release, mostly through pre-orders, suggesting the Classic has sold more.
BlackBerry is also making some headway in bringing corporate customers back on side, Chen said. The company reported that 30 per cent of subscribers to its BES10 offering, which provides security and services for corporate users, had migrated from competitors in mobile device management.
The disappointment and negative articles about this financial quarter are unwarranted. Chen is a proven and tested operator and has a plan that is working. The only people to blame for BlackBerry missing analysts’ predictions are the analysts themselves.
BlackBerry is in the middle of a turnaround and needs to get to a sustainable revenue model, this means shrinking to a right size before growth can begin in earnest.
A little over a year ago I saw a great company falling apart and believed, based on what was happening, it would soon cease to exist.
Now, judging by the evidence I can see in front of me I believe that the company is solid and real growth will begin by the end of 2015.