BlackBerry Ltd First Quarter Earnings Preview

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BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) is scheduled to report its fiscal first quarter results on Thursday, June 19 before the market opens. Over the past few months, investors have gotten a little more optimistic about the company’s earnings, slashing the loss estimates for the quarter ending May 31 by about a third. Analysts polled by Thomson Reuters expect the Canadian company to report 25 cents a share in losses, worse than 13 cents per share loss in the same quarter last year. BlackBerry’s first quarter revenues are expected to tumble 68.20% to $976.25 million.

BlackBerry’s decision to open its devices to MDM solutions a right move

Evercore analysts Mark McKechnie and Zachary Amsel said in a research note that Q1 was a transitional quarter for BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) ahead of the BES12.0 launch in November. The ailing Canadian smartphone maker launched a low-cost handset Z3 in Indonesia, which sold out on first day of its launch. BlackBerry is now gearing up to launch this device in India next week. Last month, John Chen opened BlackBerry devices to MDM solutions. Evercore analysts believe it’s a step in the right direction, but came too late.

McKechnie and Amsel are encouraged by BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) CEO John Chen’s turnaround efforts such as handset outsourcing, cost-cutting and real-estate lease backs. But Evercore remains cautious on its tardiness. The research firm has an Underweight rating on the stock with $6 price target. All eyes are set on BlackBerry’s attempt to become cash flow positive by the end of this fiscal year (February, 2015).

BlackBerry’s goal to become cash flow positive is realistic and achievable

Evercore says that’s doable given continued cost reduction from BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s restructuring efforts. And the payment of the final $300 million fixed contract royalty fee should bring down the royalty fees to $350-$40 million variable run rate. Moreover, BlackBerry is expected to receive more than $550 million in tax credits. Evercore estimates the Canadian company to burn $150 million cash in the first quarter. But the company will be about $100 million cash flow positive for the full year, including the tax credit.

Evercore expects BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) to report 19 cents in losses on revenues of $1.1 billion in the first quarter. Handset revenues are expected to come in at $506 million on sales of 2.2 million units at $230 ASP. Another $496 million is expected to come from services. Software and other revenues are expected at $75 million.

BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shares inched up 0.50% to $8.09 in pre-market trading Wednesday.

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