Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }

BlackBerry CEO John Chen can legitimately claim his mission half-accomplished.

AARON HARRIS/REUTERS

BlackBerry Ltd. CEO John Chen says he can see the bottom of the long revenue slide that has dogged the company since its heyday in 2011.

The Waterloo, Ont., technology company reported $660-million (U.S.) in revenue for the fourth quarter of its 2015 fiscal year on Friday, an unpleasant surprise to most analysts who predicted something closer to $800-million.

But a defiant Mr. Chen asked for patience, asserting his belief that revenue won't fall below $500-million a quarter, though he told reporters not to hold him to that figure.

Story continues below advertisement

"We are now halfway through our two-year turnaround effort and I'm very pleased to report that our financial house is in order," Mr. Chen told analysts during an early morning conference call. He warned that signs of growth in the key, high-margin software business shouldn't be expected until after the second quarter of the 2016 fiscal year, and perhaps not until the third.

Thanks to aggressive cost-cutting, however, BlackBerry announced a surprise profit of $28-million, or adjusted earnings per share of 4 cents. (The profit takes into account the fair value of its debentures issued in fall 2013).

Analysts had expected a loss of 4 cents per share.The company's shares, which are down 14 per cent since the beginning of the year, closed up 1.72 per cent on the news.

"The numbers are mixed," Richard Tse from Cormark Securities said in an e-mail. "The positive take is that [their] financial house is better. The fact that they were able to turn a profit [despite weak handset sales] speaks to what they've done with the cost structure."

Hardware sales, once again, are the cause of the disappointment: Mr. Chen said about $274-million was earned on sales of 1.3 million devices (both numbers came in well below analyst expectations). The good news is that gross margins have improved, rising to 48.3 per cent up from 43.1 per cent a year ago, according to analysts at Robert W. Baird & Co.

"Phones still lose money. I have a plan, at least on paper to make the handsets profitable," said Mr. Chen. "If I execute some of the stuff that I want to do, and really get very efficient on the logistics, on the warranty, some of the development costs … I probably don't need to sell 10 million phones to be profitable – I can see less than eight."

But as he has said since he joined the company in late 2013, BlackBerry needs not just to stop losing money on hardware, but to start making a lot more money on software.

Story continues below advertisement

Mr. Chen has promised $600-million in software revenue by the end of the year, which includes $100-million from messaging service BBM that Mr. Chen warned "is taking a little longer than I like in terms of monetization." When prodded if he was sure that number was still attainable, he responded: "Sure is too strong a word, but it's reasonable."

BlackBerry reported $67-million in software sales, an increase of 20 per cent from fourth-quarter 2014. But there is confusion around how much of that is coming from the all-important mobile device management business, and whether it can grow fast enough to replace the falling service revenues (which were down 15 per cent for the quarter).

"It's somewhere up in the air, in jeopardy right now, I'd say. I don't think Chen sounded convinced himself," said Ehud Gelblum, an analyst with Citi Bank.

The normally chipper Mr. Chen also showed some frustration with journalists and analysts on Friday. "This company is so public. Anything we do, there are a lot of negative stories written about it. So if I tell you that BlackBerry is gonna start giving money at the corner of the street, people will write 'Oh, they are desperate.'"

"At this point, you have to have some faith in the management team that they have in place, that they're going to execute," said Colin Gillis an analyst with BGC Partners who cautions against impatience when it comes to enterprise software. "That's always a slow sell cycle. It's going to take time."

Mr. Chen said BlackBerry added 2,200 new enterprise software customers during the quarter, but also acknowledged that the company's current portfolio wasn't going to be enough to finish the turnaround. He told reporters to expect an acquisition similar in scale to the Movirtu and Secusmart purchases some time in the next year, but not in the immediate future.

Story continues below advertisement

"It's not like next week I will be calling you back," said a smiling Mr. Chen.

With files from Sean Silcoff

Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies