As expected, BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) was walloped in premarket trading after it reported results that were far weaker than expected. Shares recovered and actually started rising premarket after the company’s earnings call, although they declined again after the markets opened.
Several swings and misses for BlackBerry
Analysts from several firms sent out flash notices regarding their thoughts on BlackBerry after the earnings report and before the conference call. RBC Capital Markets analyst Mark Sue said BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s reported revenue of $1.19 billion was $250 million below his estimate and even further below consensus of $1.58 billion.
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Smartphone sales were also significantly lower than expected, coming in at 1.9 million units, compared to Sue’s estimate of 3.3 million. Overall handset sales were 4.2 million, which means that 2.3 million of those sold were older BlackBerry 7 devices.
Gross margins were also a miss, however, at 34%, compared to his estimate of 36.9%. Adjusted losses were 67 cents, compared to their estimate of 47 cents. Net cash per share fell to $4.18 from $4.90. Also BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) took a write-down of $4.6 billion due to supply commitments and inventory. Tangible book fell to $5.12 per share from $9.38 per share in the previous quarter.
Services revenue was also a problem, coming in at $632 million, a 13% sequential decrease and a 35% year over year decrease. It was also lower than consensus, which was $674 million.
BlackBerry’s slightly brighter areas
Sue noted that one bright area was average selling price for the company’s smartphones, which ended up being $251—above his estimate of $214. Jefferies analysts Peter Misek, Jason North and Billy Kim also reported this morning that BlackBerry’s cash flow was better than expected. It was reported to be -$77 million, compared to their significantly larger estimate of -$752 million.
According to the Jefferies team, BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s overall execution was better, but they see many hurdles remaining.
Implications for BlackBerry’s results
According to Sue, the November quarter results show just how challenging BlackBerry’s position is as it tries to maintain enterprise and consumer segments. The company is focused on reducing costs while reassuring customers that it remains committed to devices. Because of the cash burn, Sue believes more layoffs will be coming. He said there wasn’t a clear strategy provided in the results, which weighed on shares initially after the report.