Blackberry $423 Million in Q4 Losses, but Investors May Rally

Blackberry

Blackberry (NASDAQ: BBRY) is on a streak of dismal performance. Their latest financial report shows losses of $423 million during Q4, but investors may yet rally behind Blackberry due to even lower expectations. After Blackberry’s Q3 losses of $4.4 billion, Q4 losses of only $423 million look promising for the Canadian telecommunications company. Shares of Blackberry opened at $9.20 on Friday, Mar. 28, 2014, up from the $9.05 close on Thursday.

Revenue for Q4 comes in at $976 million, down from $2.8 billion in Q4 earnings the previous year. The net less for Blackberry comes in at $5.9 billion for the recent fiscal year. The company has called upon new CEO John Chen to stop the bleeding.

John Chen is no stranger to harsh situations. As CEO, he revitalized the floundering enterprise software company Sybase. Analysts gave Sybase a 70% chance of failure in the late 90s, but Chen turned the company around from $365 million net worth to $5.8 billion 13 years later. Chen believes he can do it again.

CEO Chen is making changes left and right with Blackberry. He plans to make smartphone software and services the new focus of the company, rather than handset smartphones. Chen has altered the executive structure, sped up the layoff process, contracted out development, cut manufacturing costs, and even begun selling real estate. The recent financial report points out that manufacturing costs have been reduced by 51% since Q1. Chen believes that Blackberry can return to break even cash flow by 2015. Despite the $423 million suffered in Q4 losses, investors may still be willing to rally behind Chen’s ideas.

The move from Chen to focus on software and services, rather than handheld devices, is not entirely unfounded. During Blackberry’s early history, the company gained prominence through the development of secure email software for mobile devices called Blackberry Connect. Their Enterprise Server software followed, which gave employers the power to spy on phones, limit usage, and even shut phones down remotely. The company was not able to sustain the usage of their server software among businesses, though. Today, few use it, and it is fast becoming a curious relic.

The biggest problem with Blackberry is the entire handset division. It is losing money in every conceivable way. They have too many units in storage, as well. The recent financial report highlights a 30% reduction in this overstock. Recalling Chen’s success with Sybase, he often states that he would never continue operating in areas that his company is not strong in. At the moment, though, it would seem that he has little choice but to continue manufacturing smartphones because the software side of Blackberry’s business is considerably small. That could change in the future with Chen at the helm.

The future of Blackberry is just beginning to look a tad sunnier. Chen appears to be successfully stopping losses. He has a proven track record of success in a similar technology field. The company has enough resources to see itself through to Chen’s 2015 goal of break even cash flow. Even with heavy Q4 losses of $423 million, investors may still rally behind Blackberry’s intriguing prospects. After all, shares of Blackberry have managed to almost double in value since the end of 2013.

By Luke Sargent

Sources

Blackberry
Euronews
Financial Post
New York Times
The Verge

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