BlackBerry Ltd Q4 Results Were Not Impressive


BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) posted worse than expected handset sales down 78% year over year while service fees were down 43%. Effective cost cutting measures helped the company to post a narrower than expected net loss of $0.08. BlackBerry also announced the return of its legacy O/S Bold handset.

Model count rising again for BlackBerry

The Canadian firm hinted that BES monetization could be delayed until the launch of BES 12, which is expected to come in FY3Q15. This reflects the views from Hudson Square Research analyst Daniel Ernst “that replacing carrier services fees with enterprise user fees is highly uncertain.”

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BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) has already announced Foxconn Z3, the Q20 classic keyboard and the latest return to the Bold. In addition the company already offers Z30, Z10 and Q10. The model count for the company is rising again, which could impact the company’s turnaround plans and improve margins, Daniel Ernst says in a report from March 31st 2014.

Service revenues for the company were down 43% year over year compared to a decline of 36% year over year on continued churn, and lower ARPU (average revenue per user). The trend suggests that the decline is expected to continue in FY15.

Unit sales for BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) were down 78% year over year to 1.3 million while sell-through was down 57% year over year. After excluding charges, the analyst believes that the hardware margins were negative 16% compared to 32% in the third quarter, which is positive for the company.

At the end of the fourth quarter, BlackBerry had $1.4 billion in cash while the debt was $1.25 billion. Despite the improvement in the margins and a 33% decline in adjusted OPX, operating cash flow for the company was negative $533 million.

EPS estimate raised on better cost control

Baird Equity Research analysts William V. Power, Steven J. Beckert and Andrew T. Flis in a report on March 31, 2014 view the company’s cost containment efforts as positive. The analysts expect the cash burn to be moderate while revenue will remain under pressure. According to analysts, BlackBerry has failed to provide a clear path to transform into a profitable software & services entity. Analysts have lowered the top-line estimates while EPS estimates have been raised on better cost control measures.

Baird Equity Research analysts have reiterated a Neutral rating and raised the price target on BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shares from $7 to $8.