BlackBerry head focuses on future after posting US$4.4-B quarterly loss

The Canadian Press
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BlackBerry’s new leader John Chen offered a better idea of where the smartphone company is headed next year as he tries to rescue its struggling operations following a whopping third-quarter loss of US$4.4 billion, which was worse than analysts expected.

The BlackBerry Z10 is shown during the global launch of the company’s new smartphones in Toronto in January. BlackBerry Ltd. reports it had a US$4.4-billion net loss from continuing operations in its latest quarter. — File photo by The Canadian Press

One of the first steps will be a new agreement with Chinese manufacturer Foxconn, which will make the company’s handsets and help develop new phones next year.

Chen, who joined BlackBerry as chairman and interim CEO less than two months ago, laid out some of the plan in an unusually candid conference call with analysts, where he poked fun at lawyers while acknowledging he has his work cut out for him.

“We’re no longer worrying about whether we’re going to be around,” he said.

“We’re ready to fight back.”

Chen’s comments helped take the sting off an otherwise dismal set of financial results.

The company’s battered stock, which had fallen initially in pre-market trade after BlackBerry’s announcement, rallied after the Toronto Stock Exchange opened.

The stock was up $1.03, or 15.44 per cent, at C$7.70 in Toronto at midafternoon, while on the Nasdaq, where most of BlackBerry’s trading volume occurs, the shares rose 96 cents, or 15.36 per cent, to US$7.21 on more than 107 million shares.

Nevertheless, BlackBerry’s third-quarter results showed that BlackBerry 10 smartphones, once touted as the way to recover lost ground, have hardly been selling at all.

The company said more than 74 per cent of the 4.3 million BlackBerry devices that landed in users’ hands in the quarter were its older BlackBerry 7 models.

But Chen seemed undismayed.

“Whatever it takes, we’re going to make money in handsets (although) it may be a small amount of money,” Chen said at BlackBerry’s headquarters in Waterloo.

“There is a way to make this company great,” he added, saying the plan involves focusing on BlackBerry’s software business, its enterprise services and instant messaging software.

Meanwhile, the poor handset sales weighed on BlackBerry’s revenue, which was US$1.2 billion, down 56 per cent from a year ago when it didn’t have the new smartphone models on the market. It also was $400 million lower than analysts’ estimates compiled by Thomson Reuters.

Adjusted losses from continuing operations, which filter out various expenses like restructuring costs, were US$354 million, or 67 cents per share — 23 cents below analyst estimates.

BlackBerry recorded a number of items related to its restructuring efforts, but the company managed to increase its cash holdings to $3.2 billion at the end of November with the help of $1 billion raised by Fairfax Financial and a group of other investors.

During the quarter BlackBerry used about $400 million in cash for its operations.

“The cash position we have today will definitely allow us to engineer our turnaround,” Chen said.

Much of the conference call was dedicated to talking about BlackBerry’s future and areas of its business that could still generate profits.

“We admit the fact that in the past maybe we haven’t really lined ourselves up as we probably should have done,” Chen said.

“That has affected our results (and) the market has spoken. We listened and we’re going to listen even more as we go forward.”

Chen said that he aims to make the BlackBerry instant messaging software BBM generate revenue by fiscal 2016. The software has signed up about 40 million users since it was made available for iPhones and Android devices in the quarter.

He also highlighted BlackBerry’s QNX division, which works on technology that will fuse with automobiles, and said new technology from the division will be showcased at the Consumer Electronics Show in Las Vegas next month.

Chen made it clear that he hasn’t ruled out the consumer market, even though many observers had expected BlackBerry to make business users its sole focus after the failed BlackBerry 10 launch.

He said he hopes that the partnership with Foxconn will keep consumers interested in its phones in future.

Under that agreement, BlackBerry will shift much of it hardware development to Chinese electronics maker Foxconn in a five-year agreement that will begin with manufacturing a smartphone for Indonesia early next year. The handset manufacturer will help develop new models and manage the inventory with operations based in Mexico and Indonesia.

For many people, Foxconn is best known as one of Apple’s main suppliers.

A year ago, BlackBerry had a small profit of US$14 million, or three cents per share, under standard accounting, and US$2.7 billion of revenue. Analysts expected BlackBerry’s adjusted loss would be 44 cents per share and its revenue would be about US$1.6 billion.

Since Chen joined BlackBerry last month, replacing former BlackBerry CEO Thorsten Heins, he has started a dramatic overhaul of its executive ranks and begun fresh efforts to turn around the company. He said the changes establish a clear plan to improve its financial performance in the next year.

He said parts of BlackBerry’s business, including its enterprise services for organizations and its messaging products, are in good shape, and that the most immediate challenge is to improve its devices operations.

BlackBerry also cancelled its annual BlackBerry Live event in Orlando, Fla., next year, a longtime tradition where it met with carriers, developers and other industry players. The company said in its blog that it would instead host a number of “smaller, targeted events taking place all around the world over the next 12 months.”

— By David Friend, with files from David Paddon in Toronto.

Organizations: Toronto Stock Exchange, Apple

Geographic location: Toronto, Waterloo, Las Vegas Indonesia Mexico Orlando, Fla.

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