BlackBerry reports loss, but notes: 'we are near the bottoming out'

WATERLOO, Ont. -- BlackBerry Ltd. (TSX:BB) hasn't forgotten about everyday smartphone users and, eventually, chief executive John Chen hopes to pursue their loyalty once again.

But the head of the Waterloo, Ont.,-based company says that for now business customers will remain his priority.

"I've got to focus on something," Chen said during a media roundtable at BlackBerry's headquarters.

"I need to base our recapturing of the enterprise customers for this company to get back on track financially. I am by no means suggesting that this is the only thing that we're going to do."

"Over time I definitely would love to reach everyday people, but it's too early for us right now. One thing at a time."

The smartphone maker delivered a round of financial results Friday that showed some improvements, but further challenges to overcome.

BlackBerry, which keeps its books in U.S. dollars came in ahead of analyst's expectations on the bottom line, but fell short on revenue.

On the Toronto Stock Exchange, BlackBerry shares were up 51 cents or 4.69 per cent at $11.39 in early afternoon trading Friday.

The company's adjusted loss, which excluded a restructuring charge and an adjustment related to its debentures, amounted to two cents per share. Analysts on average had expected loss of 16 cents, according to a survey by Thomson Reuters.

On a fully reported basis, the loss was lost was US$207 million or 39 cents per share, compared with a net loss of US$965 million or $1.84 per share a year earlier.

Sales in what was the company's second quarter dropped to $916 million, coming in short of analyst estimates of $950 million and below the $1.57 billion reported a year ago.

"We are definitely in the first half of what I refer to as the eight quarters recovery," chief executive John Chen said on a conference call.

"From a revenue standpoint, we might not be at the lowest point, but we are near the bottoming out."

Over the past year, BlackBerry has been squeezed from all angles by Chen, who stepped into the leadership role with the goal of creating a leaner and profitable operation.

So far, he has made significant progress and has stuck to a goal of making the company break even on cash flow by February 2015, which is the end of the company's fiscal year.

But he also has to contend with a longtime BlackBerry customer base in the corporate world that has migrated to competitors like Apple's iPhone and the Samsung Galaxy models.

Fewer users has meant lower services revenue for offerings like access to its secure enterprise servers.

During the quarter, services revenue fell 18 per cent to $424 million from the previous quarter, though BlackBerry is hoping that a change in how it charges for its offerings will help bolster those results in future.

On a regional basis, revenue declined in every key market for the company with the exception of North America, where sales of older BlackBerry devices helped buoy the results compared with the first quarter, the company said.

Across the world, BlackBerry booked revenue on 2.1 million smartphone sales in the period, which is an improvement over the previous quarter when it was 1.6 million devices.

The company also boosted the cash in its coffers by $11 million to $3.1 billion.

Earlier this week, BlackBerry launched the Passport, a large-screen version of its smartphones that's aimed at corporate customers. More than 200,000 Passports have been ordered since it was released on Wednesday, the company said.

Behind the scenes BlackBerry has been undergoing a fundamental change in how it does business.

In the second quarter, the company formed BlackBerry Technology Solutions, a division focused on monetizing the assets of its patent portfolio and technology developed by QNX, which develops software technology for the automotive industry.

BlackBerry is also pushing a variety of subscription-based security services. A more secure version of its BlackBerry Messenger service is already being sold to corporate customers. Additional features like money transfer and a virtual conference service called BBM Meetings will be incorporated for an additional cost.

"We have a pretty strong plan in attacking the enterprise space for monetizing these features," Chen said.

Monetizing BBM has been a goal of BlackBerry for over a year, though it hasn't disclosed any revenue figures yet. Active users on the platform grew to 91 million in the quarter from 85 million, the company reported.

BlackBerry is also reworking its smartphone offerings to phase out the longtime BlackBerry Bold model that helped sustain sales during its most troubled days, while it will introduce the BlackBerry Classic later this year, a new take on its popular older phones.

"We respect BlackBerry's strategy and turnaround plans, but ultimately, we remain cautious about long-term demand for the firm's products that will someday transform the company into a highly profitable firm," Morningstar analyst Brian Colello said in a note which did compliment the improvements through cost cutting.

"The much harder task, in our view, will be revitalizing demand for the company's handsets and converting software licensees to longtime paying customers."