BlackBerry Q3 results: Weak BB10 sales blamed for $4.4-billion loss

CTV Kitchener: Disappointing results Disappointing sales of BB10 devices have BlackBerry looking for a new bet for its future. Frank Lynn has the story.

WATERLOO, Ont. -- BlackBerry plans to forge stronger partnerships with others in the tech industry and build better relationships with longtime business customers as the smartphone company attempts to turn around flagging operations, chief executive John Chen says.

As one of the first steps, the company announced on Friday a five-year agreement with Foxconn that will see the Chinese manufacturer begin producing a smartphone for Indonesia early next year.

The handset manufacturer, best known as one of Apple's main suppliers, will also help develop new models and manage the inventory with operations based in Mexico and Indonesia.

Chen, who was just recently brought in to head the company, has a formidable challenge on his hands after BlackBerry posted a whopping third-quarter loss of US$4.4-billion, which was worse than analysts expected.

But he set aside those dismal numbers on Friday to focus on what will be different.

"There is a way to make this company great," Chen said during a media roundtable at the company's headquarters in Waterloo, Ont.

The plan, he said, involves focusing on BlackBerry's software business, its enterprise services and instant messaging software.

While he's had less than two months on the job, the new CEO, who quietly shed the "interim" part of his title, has many ideas that include a return to some traditional BlackBerry designs.

For instance, a keyboard model will be the first smartphone to emerge under the Foxconn agreement after the failed attempt at the touchscreen BlackBerry Z10 earlier this year.

While Chen said he couldn't make any official announcements, he hinted that the keyboard phone is a priority.

"I will tell you that I always tend to listen to my customers ... My customer wants the keyboard," he said.

The plan counters some analyst suggestions that BlackBerry ditch its handset business entirely to focus on parts of its business that are more profitable.

Chen has outright dismissed those suggestions.

"Whatever it takes, we're going to make money in handsets (although) it may be a small amount of money," he said.

The road to handset profits will be a difficult one -- BlackBerry's third-quarter results showed that BlackBerry 10 smartphones, once touted as the way to recover lost ground, have hardly been selling at all. More than 74 per cent of the 4.3 million BlackBerry devices that landed in user's hands in the quarter were its older BlackBerry 7 models, the financial report showed.

Those poor handset sales weighed on BlackBerry's revenue, which was US$1.2 billion, down 56 per cent from a year ago when it didn't have the new smartphone models on the market. It also was $400 million lower than analyst estimates compiled by Thomson Reuters.

Adjusted losses from continuing operations, which filter out various expenses like restructuring costs, were US$354 million, or 67 cents per share -- 23 cents below analyst estimates.

The goal is to make BlackBerry's handset business cash-flow positive through the Foxconn agreement, with hopes of returning to a profit in fiscal 2016, Chen said.

He also wants to hire an enterprise sales force that hits the ground running to keep BlackBerry on the radar of its biggest business customers.

A security technology centre in Washington, D.C., that opens next year will be part of those first steps, Chen said. The several-thousand-square-foot building will place the company in the backyard of some of its biggest U.S. government and military clients.

"I'm going to take that fight to the market," he said.

"I think DC's very important. I've already talked to my DC customers and they love it."

The company's battered stock moved higher after Chen outlined some of his ideas on a financial results conference call with analyst. The stock (TSX:BB) closed up $1.07 or 16.04 per cent at $7.74 on the Toronto Stock Exchange. In New York, where most of BlackBerry's trading volume occurs, the company's shares (Nasdaq:BBRY) rose 97 cents, or 15.52 per cent, to US$7.22.

Meanwhile, Chen said he aims to make the BlackBerry instant messaging software BBM generate revenue by fiscal 2016. The software has signed up about 40 million users since it was made available for iPhones and Android devices in the quarter.

The company hopes to generate revenue through a combination of charging it's business customers to use an enhanced version of the service and possibly through advertising on the consumer version. Currently there is only one version of the app and it is free for anyone to use.

Chenalso highlighted BlackBerry's QNX division, which works on technology that will fuse with automobiles, and said new technology from the division will be showcased at the Consumer Electronics Show in Las Vegas next month.

Since he joined BlackBerry last month, replacing CEO Thorsten Heins, Chen has started a dramatic overhaul of its executive ranks and begun fresh efforts to turn around the company.