BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s poor Q3 results have taken a toll on the company. The struggling Canadian smartphone maker’s revenue of $1.2 billion missed Citi Research’s estimate by $250 million. Net loss of $0.67 a share was wider than Citi’s forecast of $0.45. BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shipped a total of 4.3 million devices, but only 1.1 million of them were BB10 smartphones. Citi Research analysts Ehud Gelblum and Stanley Kovler said in a research note that they still don’t see a chance of revival of BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB).

BlackBerry EPS

BlackBerry’s deal with Foxconn may backfire

The company recently signed a deal with Foxconn Technology Co. Ltd. (TPE:2354) to design and build BB10 devices for the Canadian company. It will definitely reduce costs because Foxconn Technology Co. Ltd (TPE:2354) has more strength to negotiate better deals with component suppliers. The first device will be launched in April 2014 in Indonesia, one of the strongest markets of BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB). It will be a low-cost smartphone running on BB10.

However, the analysts say that the only thing John Chen has done differently so far is letting Foxconn Technology Co. Ltd. (TPE:2354) (OTCMKTS:FXCOF) design, ship and manage inventory of low cost smartphones. Even this development isn’t significant because the Taiwanese vendor has already been designing and producing the low end models of Q5. Moreover, if the new low-end smartphone developed by Foxconn Technology Co. Ltd. (TPE:2354) (OTCMKTS:FXCOF) does well and entices the existing BB7 users to switch to BB10, BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) will lose service revenue at an increased pace. Losing service revenues in exchange for selling a device at break-even at best will further deteriorate the company’s position.

BlackBerry’s increased focus on cash

One big difference in BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) is the increased focus on preserving cash. The company has raised $1 billion in convertible debentures, slashed purchase commitments and is trying to generate future savings through amortization of royalties and licenses. BlackBerry Ltd. (NASDAQ:BBRY) (TSE:BB) has also requested tax relief from the Canadian government.

The analysts say BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s CEO John Chen has done a good job at buying more runway, but he has failed to upgrade the airplane. The company’s operating margin of -29.7% was much bigger than the consensus estimate of -23%. Citi Research estimates that the number of subscribers declined from 68 million in Q2 to 59 million in Q3.

Blackberry Estimates

Citi Research has lowered its revenue and EPS estimate to $6.9 billion and -$1.76 as sales continue to decline. Citi Research has a Sell rating on the stock with a $4 price target.

BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shares were up 2.89% to $7.66 at 11:03 AM EST.