The Canadian smartphone manufacturers Blackberry Ltd. (BBRY, Financial) are in serious need of new revenue sources as the company announced lowest sales figures in eight years, in its quarterly results reported on Friday.
Quarterly revenue stood at $660 million for the fourth quarter of fiscal 2015 – with approximately 42% from hardware, 47% from services and the remaining about 10% from software sales. This is despite unveiling new models – Blackberry Classic, Blackberry Leap and square-shaped Blackberry Passport – and a new software suite – Blackberry Experience Suite that brings Blackberry’s security, productivity, communication and collaboration software to smartphones across manufacturers and operating systems. The current quarterly revenues are one-third of the quarterly revenue earned in the same quarter last year.
“Our focus this past year was on getting our financial house in order while creating a multi-year growth strategy and investing in our product portfolio. We now have a very good handle on our margins, and our product roadmaps have been well received,” said Executive Chairman and CEO, John Chen in a statement released by the company. “The second half of our turnaround focuses on stabilization of revenue with sustainable profitability and cash generation.”
Looking for new revenue sources
Analysts on Wall Street had already lowered their expectation of Blackberry to $783 million in revenue. The company did manage to better expectations of earnings with an adjusted profit of $20 million or 4 cents per share. This was a result of massive cost cuts by the company where it cut expenses by a fifth from the previous quarter. Analysts expected a loss of 4 cents a share.
Software revenues reported were up by 20% from the same quarter last year to total at $67 million. CEO Chen is hopeful that software sales revenue will touch $500 million through more acquisitions by May 2016. Last year, Blackberry acquired anti-snooping software and technology makers Secusmart in a bid to attract customers looking for robust communications security. Revenues are set to climb over the next two quarters as Blackberry intends to net more carriers to distribute devices and software, CEO Chen told Bloomberg.
Analysts are not so confident because despite better cash flow and lower operating expenses, Blackberry has been unable to show a clear ramp up. Expecting it to deliver on its projections may be setting up for disappointment, an analyst from Wells Fargo (WFC, Financial) told The Financial Times.
Blackberry shares fell a cumulative 14% this year, while Friday trading in New York saw a 1.7% rise in share price to close at $9.46.
The Road Ahead
After coming out of retirement in 2013 in a concerted move to help put Blackberry back on its feet, CEO Chen has achieved significant changes in the struggling company. He launched five of the more successful models of smartphones, instituted operations efficiency and cost cuts, and has even posted quarterly profits. But he has been unable to arrest the decline in revenues.
Stiff competition from iPhones and Android devices and a still-growing software development unit are pulling the company in two directions. Nevertheless, CEO Chen is optimistically working to ensure that the smartphone and software manufacturer’s revenues stabilise over the next year. His focus, currently, is to keep revenue from dropping below the $500 million mark.
