Turns Out, No One Really Bought Any BlackBerrys
Shares of BlackBerry (NASDAQ:BBRY) were halted shortly before 3 p.m. EDT on Friday afternoon, down about 2.4 percent at $10.27 for the day so far. The beleaguered smartphone maker apparently wanted to brace the markets for the preliminary release of its fiscal second-quarter financial results, which missed analyst expectations by a long shot. Shares collapsed as much as 24 percent immediately following the news, to about $8, before rebounding somewhat.
According to the preliminary report (real earnings will be reported September 27), revenues are expected to come in at $1.6 billion, well below the average analyst estimate of $3.06 billion. The company reported that approximately 5.9 million smartphones were sold through to end users, and that it will recognize revenues on about 3.7 million devices.
BlackBerry is expecting an adjusted net loss — before factoring in a $950 million pre-tax charge against inventory and supply commitments, primarily attributable to BlackBerry Z10 devices — in a range between $250 million and $265 million, or between 47 cents and 51 cents per diluted share, which compares against the average analyst estimate of a loss of 15 cents per share. Including the inventory charge, net loss is expected to fall in a range between $1.81 and $1.90 per share.
President and CEO Thorsten Heins commented on Friday: “We are implementing the difficult, but necessary operational changes announced today to address our position in a maturing and more competitive industry, and to drive the company toward profitability. Going forward, we plan to refocus our offering on our end-to-end solution of hardware, software and services for enterprises and the productive, professional end user. This puts us squarely on target with the customers that helped build BlackBerry into the leading brand today for enterprise security, manageability and reliability.”
Alongside the report, BlackBerry announced that it is targeting a 50 percent reduction in overall operating expenditures, due to be completed by the first quarter of fiscal 2015. This includes a workforce reduction of up to 4,500, or 40 percent, of its global staff.
The news is certainly grim for the company, which has fought an uphill battle against Google (NASDAQ:GOOG), Samsung (SSNLF.PK), Apple (NASDAQ:AAPL), and even Microsoft (NASDAQ:MSFT) — but it’s not necessarily a surprise. BlackBerry’s lot of unsold inventory has been growing significantly since it started losing ground to market leaders. Heins hoped to offset those losses with a line of new BlackBerry 10 devices launched early this spring, but the sale of those smartphones failed to meet expectations, which was further evidenced by the company’s poorer-than-expected earnings report released in late June.
Even before BlackBerry quantified the damage, Bloomberg calculated that the size of its unsold inventory was approaching $1 billion.
Meanwhile, Cantor Fitzgerald analyst Brian White sees multiple tailwinds driving iPhone sales for Apple to as high as 6.5 million units this weekend. In a note to investors, White outlines the four major positive factors that could make this iPhone launch weekend a record-breaker. First, White notes that Apple has released two iPhone models at the same time: He believes that the different price points on the iPhone 5C and iPhone 5S will enable the Cupertino, California-based company to reach more smartphone consumers.
Second, the analyst believes that the discontinued iPhone 5 will further boost sales of the newly released devices. Third, White points out that the iPhone 5C numbers are likely to be better than expected since the device has been available for preorder since September 13.
The iPhone event far overshadowed BlackBerry’s launch of the Z30. The device’s launch followed just a month after the Canadian company said it was exploring strategic alternatives that could include the sale of the company, but no mention of its potential position on the auction block was made at the BlackBerry event Wednesday.