BlackBerry Turns A Profit, But New Phones Are Key

Investor's Business Daily

Smartphone maker BlackBerry stunned Wall Street Thursday with a surprise profit for its fiscal fourth quarter, but the Canadian company and its fledgling turnaround efforts will face a reckoning this summer, analysts say.

The Waterloo, Ontario-based company said it earned 22 cents a share for the quarter ended March 2. Analysts polled by Thomson Reuters had expected BlackBerry (BBRY) to lose 29 cents a share. For the full fiscal year, BlackBerry lost 60 cents a share.

Revenue Falls 36%

But BlackBerry's revenue came in lower than expected at $2.68 billion, down 36% from the year-earlier quarter, and below the $2.84 billion analysts had forecast.

BlackBerry shares rose nearly 7% to 15.55 in intraday trading Thursday before giving it all back and more. The stock ended the day down nearly 1%, at 14.45.

BlackBerry said it shipped 6 million smartphones in the quarter, including about 1 million BlackBerry 10 models, its newest products and best hope yet of getting back in the game vs. smartphone leaders Apple (AAPL) and makers of Google (GOOG) Android phones such as Samsung. BlackBerry also said it shipped about 370,000 PlayBook tablets.

But this is where equity analysts started throwing up red flags. BlackBerry reports "sell-in" figures for its phones, not "sell-through" numbers. It's basically filling the sales channel in hopes that those phones will actually be sold to consumers. If they don't, BlackBerry will have to heavily discount to move those products.

"They recognize revenues and margins on sell-in, not sell-through," MKM Partners analyst Michael Genovese said. "Sell-in is when a distributor or carrier orders. Sell-through is when somebody actually buys a phone. If they don't get sell-through, then they end up having to reverse out revenues and profits in later quarters.

"And that's exactly what we think is going to happen.

Ominously Quiet U.S. Launch

Genovese sees "bad news ahead" for BlackBerry based on what he's seeing in BlackBerry 10 sales to consumers. "In the U.S., the launch has been complete crickets," he said. "So far, it's been a disaster.

With the U.S. launch of its new BlackBerry Z10 touch-screen smartphone just under way as of March 22 and its Q10 model with a physical keypad coming soon, the success of its BlackBerry 10 phones won't be known for a quarter or two. But anecdotal reports point to soft early demand for new phones in markets like the U.S. and U.K.

Meanwhile, competitors are preparing to release their latest and greatest devices. Samsung Electronics is coming out with its hyped Galaxy S4 smartphone in late April and Apple is expected to follow soon with an iPhone 5S and possibly a new entry-level iPhone.

BlackBerry, formerly known as Research In Motion, faces a lot of skepticism among investors.

About 147 million out of 525 million BlackBerry shares are held short, betting on the stock to fall, says RBC Capital Markets analyst Mark Sue.

No Netflix, Pandora, Moviefone

One problem with BlackBerry 10 smartphones is a lack of apps. The new operating system has only 5% of the top iPhone apps and 10% of the top Android apps, Genovese says. It's missing such popular apps as Netflix (NFLX), Pandora (P), Sonos and AOL's (AOL) Moviefone.

BlackBerry lost 3 million subscribers in the fourth quarter, bringing its total base to 76 million. Still, that's a significant installed base to sell to, says BGC Partners analyst Colin Gillis. BlackBerry's Q4 results give hope to a company that many had left for dead before the BlackBerry 10 launch.

"They live to fight another day," Gillis said.

BlackBerry expects to break even in the current quarter, its fiscal Q1. Analysts had expected a loss of 10 cents a share. BlackBerry said it plans to increase its marketing budget by 50% from the fourth quarter.

BlackBerry also announced that Mike Lazaridis, vice chairman and former co-CEO, will retire from the board on May 1. Lazaridis said last week that he is starting an investment fund called Quantum Valley Investments.

A big overhang on the stock had been whether BlackBerry could even survive, says Sterne Agee analyst Shaw Wu. The company's Q4 showed that it could be profitable again.

"They are at least showing that they have an economic model that can work even though the company is not exactly putting a dent in the competitors yet," Wu said.

William Blair analyst Anil Doradla is already convinced that BlackBerry's profitability is not sustainable. "We remain skeptical on the long-term viability of BlackBerry 10," he said in a research note Thursday.


View Comments (2)

Recommended for You

  • Tycoon buys 30 Rolls-Royces for Macau hotel

    A Hong Kong tycoon has placed the biggest ever order for Rolls-Royce cars, agreeing to buy 30 Phantoms to chauffeur guests at a luxury resort he's building in the global gambling capital of Macau. Stephen Hung's $20 million purchase surpasses the 14 Phantoms bought by Hong Kong's Peninsula Hotel in…

    Associated Press
  • Accomplish your career goals

    At Capella University, you can learn the skills you need to succeed. Why wait another day? Get started today.

    AdChoicesCapella UniversitySponsored
  • Tycoon's arrest sends shock wave through Russia

    Tycoon's arrest sends shock wave through Russia MOSCOW (AP) — The arrest of a Russian telecoms and oil tycoon has sent shock waves through the country's business community, with some fearing a return to the dark days of a decade ago, when the Kremlin asserted its power by imprisoning the country's…

    Associated Press
  • Before You Buy Alibaba, Check Out 4 Top China Stocks

    Before You Buy Alibaba, Check Out 4 Top China Stocks While investors gear up for Alibaba Group 's (BABA) hotly anticipated initial public offering, don't forget about other Chinese stocks that are worth keeping an eye on. Today's Young Guns Screen of

    Investor's Business Daily
  • Costco Stores in Canada to Stop Taking American Express

    “The credit card relationship between American Express and Costco Wholesale Canada will not be renewed when it expires” on Dec. 31, the company said today in an e-mail to Canadian customers. The message was attributed to Lorelle Gilpin, vice president of marketing and membership for Costco…

  • "The Retiree Next Door": How successful retirees stretch their savings

    "The Retiree Next Door": How successful retirees stretch their savingsBy the time she hit her late 40s, Toni Eugenia wasn’t sure she would ever be able to retire. Eugenia, 56, a pharmacy technician who lived in Houston, was nearly $200,000 in debt and

    Yahoo Finance
  • As Fed takes baby steps, Cramer's trick for profit

    In turn, Cramer says making money in the market, involves looking at the environment through the lens of the Fed. "The trick is to remember that they speak for the common person," Cramer said. "The Fed wants the common person to make money." With that backdrop always in mind, Cramer says it becomes…

  • CNBC Anchor Calls Out Fed-Hater Bill Fleckenstein In Startling Shouting Match

    CNBC Bill Fleckenstein of Fleckenstein Capital appeared on CNBC's Futures Now program on Tuesday. Futures Now host Jackie DeAngelis came out swinging, asking Fleckenstein right at the top if he was willing to admit that he had misunderstood monetary policy. Sounding taken aback, Fleckenstein…

    Business Insider
  • Norwich Information Security MS

    Online, accredited, top ranked. NSA Center of Academic Excellence. Recognized by the Department of Homeland Security. Download your free brochure!

    AdChoicesNorwich UniversitySponsored
  • Beanie Babies creator's sentence debated in court

    Beanie Babies creator's sentence debated in court CHICAGO (AP) — Federal prosecutors seeking to put the billionaire creator of Beanie Babies in prison for hiding millions in Swiss bank accounts told appellate court judges Wednesday that the toymaker's sentence of probation threatens to erode the…

    Associated Press
  • Play

    Citi, Bank of America Offer Discounted Mortgages

    Citigroup and Bank of America will offer mortgages at discounted interest rates to help borrowers with low incomes or subprime credit. AnnaMaria Andriotis joins MoneyBeat. Photo: Getty.

    WSJ Live
  • Apple to unveil new iPads, operating system on Oct. 21 : report

    The company plans to unveil the sixth generation of its iPad and the third edition of the iPad mini, as well as its operating system OS X Yosemite, which has undergone a complete visual overhaul, the Internet news website said. Trudy Muller, a spokeswoman for Apple, declined to comment. The iPad is…

  • Gilead Stock Is Falling On These Drug Setbacks

    Gilead Stock Is Falling On These Drug Setbacks Gilead Sciences (GILD) shares are backsliding Wednesday on news that the patient drop-out rate for hepatitis C drug Sovaldi is quadruple that of clinical trials. In addition, the biotech's Phase 2 study results

    Investor's Business Daily
  • Here's What Mark Cuban Wishes He Knew About Money In His 20s

    Cuban is the owner of the Dallas Mavericks basketball team. Billionaire investor and entrepreneur Mark Cuban is generous with his advice. When we asked him what he wishes he'd known about money in his 20s, he said:

    Business Insider
  • Margaritaville casino owners seek bankruptcy

    The owner of Biloxi's Margaritaville casino has filed for Chapter 11 bankruptcy protection Tuesday, only hours before a hearing where the landlord aimed to seize the property. The filing by MVB Holding LLC in U.S. Don Dornan, a lawyer for landlord Clay Point LLC, said the company had planned to ask…

    Associated Press
  • Master's Degree in Nursing

    CCNE accredited MS in nursing in as few as 18 months online. Learn more today!

    AdChoicesNorwich UniversitySponsored
  • Embraer to sell 50 E-175 jets to Republic in $2.1 billion deal

    Brazil's Embraer SA, the world's third largest commercial planemaker, said on Wednesday it booked a firm order from U.S. The deal, which will be included in Embraer's order book for the third quarter, is valued at $2.1 billion, the planemaker said in a securities filing. The planes will be operated…

  • SHOE COMPANY: Our CEO Just Disappeared And Most Of The Money Is Gone

    "and like that: he's gone." This is an actual headline from a company press release: "CEO and COO disappeared, most of the company's cash missing." (Via FastFT) In a statement, German-based shoe company Ultrasonic said its CFO,  Chi Kwong Clifford Chan, has been unable to reach the company's CEO,…

    Business Insider
  • Billionaire Investor Says Chinese People Work Harder And Western Companies Could Face Deep Trouble After Alibaba IPO

    Michael Moritz, the chairman of VC firm Sequoia Capital, is a huge fan of Chinese internet companies and reiterated his enthusiasm for the Chinese market in an interview with The Wall Street Journal Wednesday. The billionaire investor described the Alibaba IPO as a “major landmark event” that is as…

    Business Insider
  • Play

    What the Fed Meeting Means for Bonds

    Janet Yellen & Co. are expected to hint at their timetable for raising interest rates. Here's how investors should prepare ahead of the meeting.

    WSJ Live
  • Top Analyst Upgrades and Downgrades: AEP, BHP, GE, Incyte, 3M, Tyco, Under Armour and More

    Top Analyst Upgrades and Downgrades: AEP, BHP, GE, Incyte, 3M, Tyco, Under Armour and More Stocks were firm on Wednesday morning ahead of the FOMC meeting outcome. Tuesday’s rally may have sparked higher interest again, and investors are looking for bargains

    24/7 Wall St.
  • Don't buy Alibaba stock: 'Dean of Valuation'

    Investors should steer clear of Alibaba , valuation expert Aswath Damodaran said Wednesday. On CNBC's " Fast Money ," Damodaran, a professor of finance at New York University's Stern School of Business, noted that he was looking at Alibaba stock from the perspective of a long-term investor, not a…

  • Play

    Tues., Sept. 16: Watch Humana Stock

    Humana, Global X Social Media Index ETF and Majesco Entertainment are among stocks to watch. WSJ's Chris Dieterich discusses the details with Michael Casey. Photo: Humana

    WSJ Live