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BlackBerry Posts a Small Profit

BlackBerry Posts a Small Profit
By Barry Levine

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But the news that BlackBerry posted a modest profit doesn't necessarily mean the handset maker has already reached the "sustained growth" that CEO John Chen is projecting to reach by sometime next year. Rather it indicates that BlackBerry is now matching revenue to expenses and may have reached a kind of stabilization.
 


A funny thing happened to BlackBerry as it reported on its recently ended fiscal quarter. It made a small profit. The net income -- $23 million -- was modest, but enough to surprise analysts tracking the firm, who expected another in the company's string of quarters showing losses.

The net income, the company said, excluded one-off restructuring charges. With those items, adjusted loss was $60 million. But even that is relatively good news, as the Canadian company posted a $423 million loss in the last quarter.

It wasn't all roses, however. Revenue dropped nearly 70 percent, to $966 million -- about $30 million higher than analysts' projections, but a decline nonetheless. About 39 percent of the revenue came from hardware, 54 percent from services, and 7 percent from software and other areas.

$3.1 Billion in Cash

Additionally, the company now has $3.1 billion in cash, compared to $2.7 billion in the last quarter. However, that increase is attributable to the sale of real estate and a tax refund.

Phone sales to wholesale channels reached 1.6 million handsets, compared to 1.3 million in the fourth quarter of the last fiscal cycle. However, BlackBerry saie that retailers and carriers actually sold about 2.6 million phones, drawing on existing inventory. By comparison, Apple sold more than 43 million iPhones in its last quarter.

Ross Rubin, principal analyst at industry research firm Reticle Research, told us that BlackBerry "continues to take the cost out of the business, [including] shifting its manufacturing to offshore production." Among other cost-cutting measures, BlackBerry has inked a five-year deal with Taiwan-based Foxconn to jointly develop and manufacture a number of its phones, and to help manage inventory.

The company reported it has adjusted operating expenses by a whopping 57 percent year-over-year, and 13 percent compared to the previous quarter. Rubin said that the news doesn't necessarily mean BlackBerry has already reached the "sustained growth" that CEO John Chen is projecting to reach by sometime next year. Rather it indicates that the handset maker is now matching revenue to expenses. In other words, he said, they may have reached a kind of stabilization.

'Improving Efficiency'

Chen said in a statement that his company, over the last six months, has "focused on improving efficiency in all aspects of our operations to drive cost reductions and margin improvement." The company said that its adjusted Q1 gross margin was 48 percent, compared to 43 percent in the previous quarter.

The company continues to move forward on other fronts. On Wednesday, for example, it announced that the Amazon Appstore will now be available on smartphones running on its new 10.3 operating system, which will be launched in the fall.

This will give BlackBerry users access to nearly a quarter million Android apps in Amazon's inventory. At the same time, BlackBerry said it would be closing its music and video stores on Blackberry World, beginning in late July. Owners can keep their previously purchased content, but no new content will be sold.
 

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