BlackBerry smartphone sales retreat as it confirms Android phone

25 Sep 2015 | Author: | No comments yet »

BlackBerry Plans Android Device as Loss Exceeds Expectations.

In its latest earnings report, BlackBerry has confirmed that rumors of its first Android device, called Priv, are accurate. In its second quarter financial results, BlackBerry said it “plans to launch a flagship handheld device that will run on the Android operating system with BlackBerry security.” Originally rumored to be called the BlackBerry Venice, sporting a BlackBerry-esque sliding keyboard (H/T evleaks), the Canadian company stated in its Q2 report that it is “focused on making faster progress to achieve profitability in our handset business,” before confirming the launch of “Priv,” a name that was first rumored earlier this week.

On the positive side, the Waterloo-based smartphone maker did report US$51 million of net income, which was an improvement on the year-earlier net loss of US$207 million, as well as US$100 million of positive cash flow.CEO John Chen has vowed to sharply increase revenue from mobile device management software and from secure enterprise server licensing fees to make up for plunging contributions from handset sales.Friday’s BlackBerry Ltd. earnings release is half-time for the company’s 2016 fiscal year, the midway point in what chief executive John Chen is projecting to be a transformative 12 months. CEO John Chen said that the device will “support Android for Work on the the BES12 platform… (and) offer best in class security for enterprise customers.” The device will arrive by the end of 2015 “in major markets in-store and online,” and Blackberry will reveal other details like specs and price within the next few weeks. But on the adjusted basis that’s followed by most analysts, BlackBerry had a loss of US$66 million or 13 cents per share — deeper than the nine cents per share that had been estimated.

Chen has called his shot that his turnaround plan will leave the Waterloo, Ont., tech icon with a much stronger software business – and overall healthier balance sheet – some time in calendar year 2016. Over the past few weeks, those reductions have centred on deep cuts to its hardware development and manufacturing business as it puts a lower priority on smartphone development, according to two sources who were familiar with the cuts. The sources both say hundreds of additional jobs have been quietly shed over the summer, affecting offices in Ottawa and BlackBerry headquarters in Waterloo, in particular. Device revenue fell 52 percent to $201 million, as the company shipped the fewest number of smartphones since 2007, according to data gathered by Bloomberg. The Waterloo, Ont.-based company’s fortunes have plunged amid competitive onslaughts in hardware from Apple and Samsung, and overall revenue has been tumbling for more than two years.

The company, which confirmed some job reductions earlier this summer but refused to disclose numbers, declined late Thursday to say how many jobs were part of more recent cuts. While BlackBerry is seen posting a money-losing quarter, it is still expected to report more than $1.766 billion in net cash after debt, bolstered by one-time items and disciplined spending control. But there’s also the possibility that this quarter will finally mark the revenue floor for BlackBerry, in which case, brace for some ugly headlines Friday. BlackBerry has said it expects its acquisition of secure mobile platform company Good Technology to add $160 million to fiscal 2016 software sales, despite a short-term drag on earnings reflecting the $425 million purchase price.

Street-low and well below consensus estimates of $611-million.” One reason is BlackBerry’s Service Access Fee dollars – only collected on old BB7 devices – are disappearing faster than ever: Mr. Morgan Stanley’s James Faucette wrote: “Without a more significant uptick in BES 12 [software] revenue, we think the company will have to continue acquiring revenue to maintain current opex levels.” The hope is that those acquisitions will result in growth fast enough to avoid grinding down BlackBberry’s cash position. But both analysts sounded another alarm, that the mobile-device-management space – where Blackberry hopes to build its software future – is getting more competitive all the time. “AirWatch and Microsoft offer bundled enterprise software solutions and customers demand productivity features beyond ‘lock-it-down’ device management,” Mr.

Chen has outsourced some manufacturing and continues to pare jobs as he seeks to break even on hardware, which he calls a necessary platform for building software sales. Faucette wrote. “From a security budget standpoint, we think CIOs are prioritizing broader threat detection/analytics solutions over standalone device security solutions.” That bundling of extra services is why BlackBerry has purchased AtHoc, Watchdox, Secusmart and Movirtu in recent months, but Mr. Chen has been guarded about reports that BlackBerry is building a phone using Google’s Android open-source operating system, which could be fortified with BlackBerry security features.

Sue was succinct about the challenge: “Up-selling is difficult, especially compared to BlackBerry’s legacy mandatory services fees.” What impact the rumoured Android-based BlackBerry device might have on the hardware business is harder to predict. Some analysts say Android would broaden Blackberry’s hardware reach, while others suggest it would undermine the company’s’ reputation for secure mobile solutions. Chen has said organic growth is not sufficient to meet the company’s software revenue target and has acquired smaller companies with a focus on boosting mobile security. The Good Technology deal is not expected to close until the third quarter, but Chen could highlight revenue brought in by other acquired enterprises, such as Secusmart and WatchDox, and from long-term division QNX, which provides auto infotainment systems.

The consensus view is that BlackBerry could see sales of a million devices in the second quarter, compared to a global handset market that’s shifting 341 million units every three months.

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