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Why expense reductions could help BlackBerry break even in 2016

Puneet Sikka

BlackBerry announces mixed Q4 results as its struggle continues (Part 2 of 5)

(Continued from Part 1)

BlackBerry’s decline in losses is an encouraging sign

In the last article in this series, we discussed BlackBerry’s (BBRY) fiscal Q4 results. Its adjusted EPS of -$0.08 per share were better than the consensus estimate of -$0.56 per share. This is an encouraging sign for a company trying to stay afloat in the smartphone operating system market, where it’s been facing stiff competition from Google (GOOG), Apple (AAPL), and Microsoft (MSFT), as well as vendors such as Samsung (SSNLF) and Apple in the smartphone market. In the last article of this series, we observed that BlackBerry has been losing market share to the above players fast. However, all is not lost for BlackBerry, which has improved its financials by managing to cut down its losses.

BlackBerry’s managing to reduce its operating expenses

As the above chart shows, BlackBerry has reduced its EPS loss from $0.67 per share in fiscal Q3 2014 to $0.08 per share in fiscal Q4 2014. The company attributed the reduction in loss to the operating expenses decrease by 30% in the fourth quarter compared to the third quarter of fiscal 2014 on an adjusted basis.

During the conference call to discuss earnings, James Yersh, the CFO of BlackBerry, mentioned, “The decrease is attributed to reductions we made in outsourcing and consulting services for the Company, reduced marketing driven by seasonality and a more focused spend prioritization as well as headcount reductions.” He also mentioned that the company will continue to reduce costs as it realigns its business. However, Yersh also mentioned that key investments will be required going forward for the company’s future growth.

BlackBerry should become profitable in fiscal year 2016

John Chen, the CEO of BlackBerry, mentioned that the company will achieve its goal of a cash flow breakeven by the end of fiscal year 2016, and also achieve profitability in fiscal 2016. Chen remarked, “Obviously, our Q4 performance, that give us increasing confidence towards meeting our first financial milestone that is to achieve goal of cash flow breakeven by the end of the fiscal year and to reach profitability in fiscal 2016. That said, we have a very sensible investment plan, which include new product launches and building our new channels over the next few quarters, and so expect some fluctuations of our loss as we work towards profitability. But then we are reaffirming our goal as we have laid out in terms of cash flow breakeven from operations as well as profitability in the FY16.”

Continue to Part 3

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