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BlackBerry Misses Analysts' Estimates: Handset Business Approaching Flatline?

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Blackberry's financial numbers are in, and its revenues fall below the expectations of business analysts by a wide margin. The release of its Android phone Priv didn't help either.

There was a time when Blackberry was the leader in mobile telecommunications, particularly in smartphones designed for enterprises or business executives. Over the last years, though, it suffered a major setback with the massive success of its competitors like Google and Apple.

The financial figures might reflect that. In its new financial report for the three months that ended on Feb. 29, Blackberry posted [PDF] non-GAAP and GAAP revenues of $487 million and $464 million, respectively. However, this is significantly lower than the projection of analysts at $566 million.

At 45.3 percent, its gross profit margin, though higher than the third quarter, is still lower than the 48.1 percent it declared around the same time last year.

The company also didn't do so well with hardware sale as they sold 600,000 or 100,000 phones less than the previous quarter. This is even after the company launched its high-end smart phone called Priv released on Nov. 15.

Unlike the other smartphones released by the company, Priv is the first to run on an Android instead of its proprietary operating system as a way of gaining leverage and access of the extensive market and app suite of Google, although the device is still equipped with the security features the company is highly known for.

Priv generated some positive reviews but performed poorly in sales. It also remains unknown as to how many of the phones were sold in the fourth quarter.

Company CEO and executive chairman John Chen has blamed the general slow sales of expensive phones — Priv retails at $699 in its U.S. website — and the long and delayed negotiations with mobile carriers.

In the meantime, Chen hints of a mid-range device to beat the "saturated" market of high-end smartphones, as well as increasing its distribution and selling at least 3 million of their phones with an average price of $300 to declare a break even. In a worst-case scenario, he might stop making these phones altogether.

There's also a silver lining. With a loss of only 3 cents per share, it beat the analyst's estimate of a 10-cent loss per share. Its software and services revenue is significantly better at $153 million, which is a 106 percent increase from the same quarter of the previous year. Further, 70 percent of its software revenue is recurring, and the company has generated more than 3,600 customer wins.

"Overall, BlackBerry's Q4 performance was solid as we made progress on the key elements of our strategy, which are to grow software faster than the mobility software market, achieve device profitability and generate positive free cash flow," said Chen.

Software has also helped the company exceed its target for the full year at $500 million. Now, the company aims to grow this department by 30 percent for the next fiscal year, along with a more positive cash flow and adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA).

“Looking to FY 2017, our strategy is on track and our growth engines are in place to continue to generate above market growth in software and achieve our profitability objectives,” he added.

Photo: Nicolas Nova | Flickr

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