BlackBerry Ltd (BBRY, Financial) is slated to reveal its fourth quarter earnings for fiscal 2015. The company’s stock has plunged 86% over the last five years, with Google Inc.’s (GOOG, Financial) Android and Apple Inc. (AAPL, Financial) devouring BlackBerry’s share in the smartphone market. Although the company has tried in recent times to shift focus to the software segment, BlackBerry continues to rely heavily on hardware to drive revenues. The BlackBerry stock is already down 13% in fiscal 2015, but is up 1.1% since its last earnings release.
BlackBerry has reported fall in year-over-year revenues in eleven out of the last twelve quarters. For the third quarter of fiscal 2015, BlackBerry’s revenues came in at just $793 million, missing the consensus estimate of $945 million and representing a steep decline from revenues of $1.2 billion in Q3 2014. Moreover, the company’s sales of 1.9 million smartphones for the quarter remained flat year-over-year despite BlackBerry’s high-profile launch of its flagship BlackBerry Passport phone in Q3 2015. However, the company reversed its declining earnings trend with a profit of $0.01 per share for Q3 2015, which significantly beat the consensus estimate of a loss of $0.16 per share. The figure was also a vast improvement over BlackBerry’s disastrous loss of $0.67 per share in the year-ago quarter.
Focus on Software Solutions to be a Make or Break
With the company acknowledging that it would take a few years for the revenues to get back on the growth path, BlackBerry’s focus has been on achieving break-even in cash flows by the end of fiscal 2015. The projected Software revenue for fiscal 2015 is $250 million, with the company hoping to double the figure to $500 million in fiscal 2016 on the back of expansion activities, increase in monthly subscription costs and reinforcement of support contracts. BlackBerry has launched several solutions during fiscal 2015, including services to help businesses manage their employees’ phones irrespective of the phone make, a product to allow users to be billed separately for private and business usage on the same device and an encryption and anti-eavesdropping service targeted at larger and government organizations.
The company also launched it BlackBerry Classic and BlackBerry Passport smartphone models during the quarter, indicating federal governments to be its target customers. However, not all experts are satisfied with the company’s chosen path and question BlackBerry’s potential for success as a gadget player in the smartphone segment, given that its hardware have fallen short of expectations over the last three years.
On the up-side, the company made two significant announcements in Feb 2015, indicating its seriousness in tapping its software solutions segment. Firstly, the company said Android apps for the new BlackBerry Classic would be available via Amazon’s app store, which, combined with the smartphone’s incredibly cheap pricing and classic BlackBerry real keyboard features, is expected to drive sales for the product. Secondly, the company teamed up with Google to secure Android phones, which vastly increases the scope for its encryption services.
Final Thoughts
While the company remains in a turnaround phase, BlackBerry has become cash flow positive in fiscal 2015, as expected. The company has beaten earnings estimates by 6-47cents a share in the last four quarters, primarily due to overly negative market expectations. Consequently, consensus is less negative amongst experts for the fourth quarter. For Q4 2015, experts are expecting BlackBerry to post an earnings loss of 3 cents a share compared to the prior-year quarter’s earnings loss of 8 cents a share, while revenues are expected to come in at around $801 million, down 17.9% year-over-year.
While it is a given that the market is far from optimistic about BlackBerry’s Q4 revenues, experts are looking to see if the company reiterates its $500 million revenue guidance for fiscal 2016, which is an indicator for the company’s future organic growth. Experts opine that BlackBerry would have to report breakeven or better on revenues closer to the $910 million mark to gain a positive reaction from investors. BlackBerry shares have mostly traded in the $9.5-$11 range in the last six months, hitting a 52-week high of $12.63 in Jan 2014. The BlackBerry stock currently carries a price estimate of $9.37 a share and a ‘hold’ guidance.
