BlackBerry (NASDAQ:BBRY) came out with its fourth quarter earnings release on Friday and the result can be called a mixed bag. On one hand John Chen, the new CEO, was able to reduce the costs substantially, but on the other hand the top-line of the phone maker reported a drastic fall. BlackBerry’s lower than anticipated loss surely is a positive point, but the 64% drop in sales is alarming, especially considering the juncture where the company stands at.
A look at the numbers of the quarter
The Canadian phone maker reported revenue of $976 million in the fourth quarter, down from prior year period’s $2.7 billion and the bottom-line came at a negative $423 million or -$0.80 per share, down from prior year period’s positive $98 million or $0.19 per share. Apart from this, there are a few other negatives, such as the declining revenue contribution of the hardware segment. This time the hardware segment contributed only 37% to the revenue as against 40% of third quarter and 61% of year ago quarter.
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All hopes lost for BlackBerry?
Not actually. Among all these depressing figures there is something that is indicating at the possibly better days to come for the phone maker. While the company reported losses, the quarter figures were much lower than what the analysts and industry experts had expected. This is a positive sign for sure. Ever since Chen took the chair, he has been massively focusing on what he does best – cost cutting.
The new CEO expects the company to report neutral or positive cash flow by the time the current fiscal year ends. However, he is not being blindly optimistic and expects the company to report profits not before the next fiscal year. Even Brian Colello, a Morningstar analyst, believes that the reduction in the operating cost can be taken as a positive sign and he believes that, with further cost reduction, there is a good chance that the company could break-even by 2015-end.
The focal point
Reducing cost is a very good thing no doubt. But, just that won’t help this troubled company to get back on its feet. What BlackBerry needs is to reignite the demand for its products. The basic revenue driver for any company is its offering. While BlackBerry is shifting its focus gradually from being a hardware company to a software company, the management can’t ignore the hardware business altogether.
It’s true that BlackBerry devices have been punched down badly by those from Apple (NASDAQ:AAPL), Samsung (SSNLF) and many other Google (NASDAQ:GOOG) Android powered smart devices. But still the company can’t give up totally and even Chen understands this. That’s why the management has decided to move back to the basics and produce handsets that have brought huge business for several glorious years. The company is moving back to the enormously successful keyword devices and they can be expected to hit the market within a year at the earliest. However, this doesn’t mean the company is not working on becoming a software company.
Despite reporting losses, analysts and industry experts are not anymore writing off BlackBerry from their books, and the primary reason for that is John Chen. Earlier analysts were worried that the company was heading towards its demise, but now, after analyzing Chen’s plans, they think the word “distressed” will soon not be used anymore to define BlackBerry as a company. Let’s keep a close watch on the company and see how the company fairs under Chen’s leadership.