Citi has lowered BlackBerry revenue targets for the current quarter (4Q FY15) and for the fiscal year 2016, because it thinks that both device sales and software sales are going to be well below expectation. Citi analyst Ehud Gelblum expects BlackBerry to report $213 million in revenue for its Hardware division, not only a big drop from the previous $493 million estimate but also a decline from last year’s $358 million in revenue for the division.

Citi Lowers Revenue Estimates On BlackBerry Ltd

“With the Passport still in short supply, and we believe destined to be a modest volume device, the Classic just beginning to ramp in January and not yet at stores, and shipments of Z10s, Z30s, Q10s and Q5s all but finished, we expect low average selling price Z3s and remaining BB7 Bolds and Curves to make up the bulk of February quarter shipments,” Gelblum wrote.

Gelblum, who rates BlackBerry as a Sell with an $8 price target (currently trading at $10), also decreased fiscal year 2016 revenue estimates from $3.24 billion to $3.22 billion.

Handset sales aren’t a priority for BBRY

The modest volumes aren’t a surprise, BlackBerry CEO John Chen has deemphasized handset sales as part of his larger strategy to turnaround the company, preferring to focus on BlackBerry’s industry-leading security and strong enterprise business. In interviews he hasn’t ruled out the possibility that BlackBerry will fight for mobile market share again in the future, but for now it’s not a priority.

With that in mind, while disappointing handset sales may be a drag on revenue for the quarter, it isn’t likely to dissuade BlackBerry bulls because it doesn’t cut to the heart of what Chen is trying to do. The hardware division’s revenues plummeted from $2.1 billion in 1Q FY14 to $358 million in 4Q FY14, but have stabilized since then. More importantly, operating income (which was more than $5 billion in the red in 3Q FY14) is starting to get under control.

BlackBerry continues to operate at a loss

BlackBerry is still operating at a loss, so Gelblum’s assessment that the stock is high risk makes sense. Chen has always said that his turnaround efforts would take a few years to bear fruit. He’s saved the company from what looked like freefall a year and a half ago, even though he hasn’t completely stopped the bleeding. The question now is whether software and service revenues can push the company firmly back into profitability.