BlackBerry is no longer teetering on the edge of extinction, but the embattled smartphone maker still has a lot to do to make a comeback. The company helped push the smartphone market to the mainstream before Apple's iPhones and the smartphones running on Google's Android took over.
At the second quarter conference call with shareholders on Sept. 26, BlackBerry lost two cents per share on an adjusted basis or $207 million, a much smaller amount compared to last year's loss of $965 million. Analysts surveyed by Thomson Reuters I/B/E/S predicted that the Canadian company would post a loss of 16 cents per share or $951 million.
"We are definitely in the first half of what I referred to as the eight quarter recovery," said John Chen, CEO of BlackBerry. "We might not be at the lowest point but we are near bottoming out of this revenue."
BlackBerry, however, has a lot left to do, as revenue fell short of analyst expectations of $950 million, with the company announcing $916 million in sales, representing a 46 percent drop from last year's $1.57 billion. Unit sales of its devices also slid from 2.6 million in the previous quarter to 2.4 million.
Still, investors are pretty happy with the company's second quarter results, with shares going up as much as 8.8 percent in trading and closing with a 4.7 percent jump, or 47 cents, to $10.27 at closing on Sept. 26.
The stronger results were due to Chen's severe cost-cutting measures, including a series of layoffs and the outsourcing of its smartphone manufacturing business to reduce inventory risk. Chen said the company has hit its cost-cutting target "three months ahead of schedule" and has generated profit from its device business for the first time in five quarters as the result of lowering manufacturing costs and the rising popularity of the BlackBerry Z3 in markets outside the United States.
"This is the first time in a long time that we have actually made money on hardware," Chen told Reuters. "We think we can continue on that track, so hardware is no longer going to be a drag to the margin and the earnings."
BlackBerry is banking on the success of its newly introduced Passport, an unconventionally square-screened smartphone launched in Toronto, London and Dubai last week. The device is targeted toward business and government professionals, which BlackBerry says make up some 30 percent of the entire smartphone market. It was sold out six hours after it became available on Sept. 24. Chen told analysts BlackBerry received 200,000 initial orders for the Passport.
Chen said it has had "extremely good receptivity" from corporations about the new Passport, which has a current sales price of $599 that the company deems profitable. He also said potential clients are not just showing interest in the price but are also asking questions about the technology, which Chen says gives him "a level of confidence that they are not doing that because it's cheap, but they believe it is a better product."
The company also relies heavily on BlackBerry Enterprise Service 10 (BES10), its new device management platform, which provides businesses and government agencies a secure platform to manage their BlackBerry, iOS, Android and Windows Phone devices. Chen said the company has issued more than 3.4 million licenses for BES10, an increase of around three times from last quarter's signups.
"They're taking all the right steps, which is great. It's encouraging to see," says analyst Colin Gillis at BGC Partners. "Now we've got to see what Chen can do about the revenue decline."
