BlackBerry Beats Street, CEO Says It's on Track To Profitability


Under the leadership of its new CEO John Chen, BlackBerry has managed to slow its fiscal free fall, reporting Friday smaller fourth-quarter losses than analysts estimated. BlackBerry fourth- quarter sales dropped 64 percent to $976 million compared with a year earlier; analysts had estimated $1.11 billion. BlackBerry lost $423 million in the fourth quarter, or 80 cents per share.

The Waterloo, Ontario-based company said that cost-cutting and “significantly streamlined” operations has put it on track to profitability. In a call with media and analysts Friday, Chen said BlackBerry was on pace to break even in 2015 and become profitable in 2016.

BlackBerry said it cut operating costs by 51 percent compared with the previous year. The company also said it sold 3.4 million handsets in the fourth quarter, helping it reduce channel inventory. However, the majority of those handsets sold, totaling 2.3 million, were the company's older model BlackBerry 7 devices.

Related: BlackBerry On The Rebound? 10 Hopeful Signs

David Felton, president of Canaan Technology, a BlackBerry partner in Norwalk, Conn., said Chen is pushing BlackBerry in the right direction by de-emphasizing hardware and pushing software and services.

"The handset war is cutthroat and BlackBerry is smart to focus instead on its core strengths -- security and mobile device management with BES 10," Felton said. "What my customers need is not another handset to choose from, but a better, smarter and more secure management of that hardware."

Felton said his customers still view BlackBerry as an afterthought. But, he said, he is encouraged by the company's better-than-expected earnings. "Most important takeaway is that Wall Street recognizes that BlackBerry isn't dead."

Next, Felton hopes, business customers will realize that BlackBerry's security-focused management software is actually cutting edge.

BlackBerry Wednesday received an important nod from the federal government in the form of a security clearance for use of its BES 10 by U.S. government agencies to manage and secure Android and iOS devices. The clearance impacts BlackBerry's Secure Work Space offering, part of its BES 10 platform. Now BlackBerry meets Federal Information Processing Standard 140-2 certification and its mobile device management platform can be used to wall off corporate email, calendar, contacts and memos on nearly any smartphone and tablet device.

"I am very pleased with our progress and execution in fiscal Q4 against the strategy we laid out three months ago," Chen said in a prepared statement (PDF). "We have significantly streamlined operations, allowing us to reach our expense reduction target one quarter ahead of schedule. BlackBerry is on sounder financial footing today with a path to returning to growth and profitability."

Chen, who took BlackBerry’s reins in November, has been credited with narrowing the company’s focus and helping transform it from a smartphone giant to a much smaller software and services provider.

Some of those efforts have included jettisoning the company's manufacturing end of the business and inking a deal with Foxconn to manufacture its phones instead. Chen is also credited with championing new enterprise mobile management services, inking a telematics deals with Apple, and promoting BlackBerry Enterprise Server 10 as the most secure platform for securing iOS, Android, Windows and BlackBerry mobile devices.

PUBLISHED MARCH 28, 2014