Saturday, June 29, 2013

No sign of BlackBerry turnaround in results, shares drop

By Euan Rocha and Alastair Sharp

TORONTO (Reuters) - BlackBerry offered few signs of a long-promised turnaround on Friday, with an unexpected quarterly operating loss, a dearth of details on sales of its make-or-break new line of devices and no return to profit expected in the current quarter.

BlackBerry shares tumbled about 28 percent in both U.S. and Toronto trading.

The Canadian smartphone maker, which has struggled to compete against Apple Inc's iPhone, Samsung's Galaxy phones and other devices powered by Google's Android operating system, said smartphone sales were up 13 percent from the previous quarter, a period when buyers waited for the BB10 phones to hit the market.

But deliveries are down from a year ago as sales of its older line of BlackBerry devices taper off.

"We haven't received the BlackBerry 10 unit numbers yet, but certainly it doesn't bode well for the initial BlackBerry 10 launch, particularly the Z10. But even the outlook for a Q2 loss doesn't bode well for the Q10 either," said Brian Colello, an analyst with Morningstar.

BlackBerry launched two all-new smartphones this year, the touch screen Z10 device, followed by the Q10, which includes the mini keyboard many BlackBerry users still covet.

It has also launched the Q5, a lower-end keyboard device targeted at emerging markets, and plans to unveil one more cheaper phone running on its old BlackBerry 7 platform later this year, hoping to stave off market share losses in price- sensitive emerging markets flooded with cheap Android devices.

BlackBerry invented the concept of on-the-go email with clunky little devices with a mini keyboard. It offered levels of security that made the devices attractive to the business, government and legal clients, but they are now moving to other devices and leaving BlackBerry chasing both a high-end and a low-end market.

"They're not the high-end provider anymore, they're not Apple, they're not the low-end provider, they're not Nokia, so they are in the middle and they do relatively low volumes," said Daniel Ernst, of Hudson Square Research in New York.

"It's difficult to make great margins on that kind of volume, so I would say the outlook is quite negative then."

Excluding one-time items such as the cost of job cuts, BlackBerry reported a loss from continuing operations of $67 million, or 13 cents a share, on revenue of $3.1 billion.

Analysts, on average, expected a profit of 6 cents a share, on revenue of $3.36 billion, according to Thomson Reuters I/B/E/S Estimates.

Earnings were also reduced about 10 cents a share due to Venezuelan currency restrictions.


The company forecast an operating loss in the current quarter. Chief Executive Thorsten Heins cited the need for increased investment in a competitive environment.

The company has been consumed over the last year with developing the new phones and making sure they work, and the devices were not ready for the all-important holiday season at the end of last year.

The Z10 only hit store shelves in the crucial U.S. market in late March, while the Q10 device only reached the United States after the end of BlackBerry's fiscal first quarter.

The Waterloo, Ontario-based company said it shipped 6.8 million smartphones in the quarter. On a conference call it said 40 percent of them, or 2.72 million devices, were BlackBerry 10 devices. Analysts looked for shipments of about 3 million of the new phones.

It reported a net loss of $84 million, or 16 cents a share, in the fiscal first quarter ended June 1. That compared with a year-earlier loss of $518 million, or 99 cents a share.

BlackBerry did not provide a detailed outlook for the rest of the year, saying the smartphone market remained highly competitive, making it difficult to estimate units, revenue and levels of profitability. It also said it would not supply subscriber numbers due to changes in its revenue model.

(Writing by Janet Guttsman; Editing by Jeffrey Benkoe)


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