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BlackBerry shares fall sharply after smartphone maker posts shock loss
BlackBerry shares fall sharply after smartphone maker posts shock loss
(10 days later)
More than $2bn was wiped from the stock market value of smartphone maker Blackberry on Friday after financial results suggested its bid to join the personal computing revolution had hit the wall.
BlackBerry shares are in freefall, with traders slashing $1.2bn from the smartphone maker's valuation after weak sales of its revamped range drove the company to a shock loss.
Wall Street analysts had expected the Canadian company to produce a modest $25m (£16.4m) operating profit but instead the firm revealed a shock $169m loss and missed its sales targets.
Wall Street expectations of a modest $25m (£16.4m) operating profit were dashed on Friday when BlackBerry revealed a $169m loss and revenues of $3.1bn, well below the $3.4bn forecast.
BlackBerry has spent the last 18 months evolving its handsets from email machines to internet phones capable of hosting any application from Ebay to Twitter.
The news dashed hopes that the chief executive, Thorsten Heins, who took control from the company's founder, Mike Lazaridis, last year, had put it on a firmer footing in its make-or-break bid to take on Apple and Samsung in the smartphone wars.
But the group shipped just 2.72m of its new generation Z10 and Q10 handsets in their first full quarter on sale, up from 1m last quarter. Wall Street had been expecting an already weak 3m. In total, 6.8m Blackberry handsets were shipped in the three months to the beginning of June, fewer than a year ago and well below forecasts of 8m.
Shipments of smartphones including the newly released Z10 and Q10 handsets, BlackBerry's first fully fledged internet phones, were 6.8m, well below forecasts of 8m.
The news shook hopes that chief executive Thorsten Heins, who took control last year from the company's founder Mike Lazaridis, had put BlackBerry on a firmer footing against Apple and Samsung. The heavily shorted shares crashed 27% in three hours, losing every cent gained since January.
It was an improvement on the 6m smartphone shipments for the quarter to March, but not as much as analysts had hoped for from the first full quarter of sales for handsets running on its revamped BB10 operating software.
"We are doing the right thing," Heins assured investors on Friday. "A transition takes time."
BB10 is designed to evolve BlackBerry handsets from emailing machines into smartphones which have fast internet communications and can host as wide a variety of apps as those for Android or Apple devices.
Analysts said BlackBerry was fast running out of options. Overall revenues were up 15% on the previous quarter, but the safety net of monthly subscriptions to its business and consumer services is being whittled away – subscriber numbers fell to 72 million, from 76 million in the previous quarter.
BlackBerry's shares fell 16% in the minutes after the company revealed its performance in the quarter to 1 June, wiping $1.2bn off its previous $7.6bn stockmarket value.
"In terms of user traction they are in crash mode," said Pierre Ferragu at asset manager AllianceBernstein. "They are getting closer and closer to the ground at an accelerating pace. You should never say never but it is probably too late for them to be acquired by anyone."
In its first-quarter results statement, the company said: "The smartphone market remains highly competitive, making it difficult to estimate units, revenue and levels of profitability." As a result, operating losses are expected to continue, with the company forecasting more in the second quarter.
Rumours that Chinese manufacturer Lenovo was interested in acquiring BlackBerry had helped lift its by a quarter since January, and its stock market value stood at $7.6bn on Thursday night. By mid-afternoon on Friday, this had fallen to $5.4bn.
Unexpectedly, BlackBerry's much maligned PlayBook tablets continued to sell, with 100,000 shipped in the quarter.
The financial picture was further darkened by a planned currency devaluation in Venezuela, which held back payments from BlackBerry subscribers in the country, and slashed $72m from service revenues.
Heins said: "Over the next three quarters, we will be increasing our investments to support the rollout of new products and services to demonstrate that BlackBerry has established itself as a leading and vibrant player in next-generation mobile computing solutions for both consumer and enterprise customers."
In its first-quarter results statement, the company said: "The smartphone market remains highly competitive, making it difficult to estimate units, revenue and levels of profitability." As a result, operating losses are expected to continue, with the company forecasting more in the second quarter. BlackBerry still has a cash cushion of $3.1bn, its biggest for three years.
Recent weeks have seen executives depart in key markets. Rob Orr, promoted to UK managing director nine months ago, has left to join Samsung and Sunil Dutt, managing director of BlackBerry's sizeable Indian business, quit in March, 14 months after joining the firm.
Mike Walkley, an analyst with broker Canaccord Genuity, said: "With Z10, Q10, and Q5 all shipping in the August quarter and BlackBerry still guiding to a loss we believe that is strong evidence BB10 has not turned around BlackBerry in an extremely competitive smartphone market."
