BlackBerry (BBRY) Posts Narrower-Than-Expected Q1 Loss

Canadian handset manufacturer BlackBerry Limited (NASDAQ:BBRY) posted first-quarter fiscal 2017 (ended May 31, 2016) adjusted loss of 2 cents per share, narrower than the Zacks Consensus Estimate of a loss of 10 cents. However, quarterly loss (on a reported basis) of $1.28 per share was wider than the year-ago loss of 10 cents.

Results in Detail

Total revenue in the reported quarter was $400 million, down 39.2% year over year. The top line also missed the Zacks Consensus Estimate of $468 million.

Segment-wise, 39% revenues came from Software and Services licensing, while Hardware contributed approximately 36% of the revenues. Services access fees revenues accounted for the remaining 25%. The company also won 3,300 enterprise clients in the reported quarter.

Geographically, North America contributed 48.8% to the total revenue, while Europe, the Middle East and Africa accounted for 38.7%. Similarly, the Latin America and the Asia-Pacific regions generated 2.5% and 10%, respectively, of the total revenue in the quarter.

Quarterly operating loss came in at $655 million. The company had reported a profit of $89 million in the year-ago quarter.

For the reported quarter, BlackBerry used cash amounting to $65 million including $61 million for operations. At the end of the quarter, cash and cash equivalents came in at $1.2 billion compared with $0.96 billion for the quarter ending Feb 29, 2016. Long-term debt in fiscal first quarter totaled $1.25 billion as against $1.28 billion in the previous quarter.

Outlook

BlackBerry, presently carries a Zacks Rank #3 (Hold). The company expects to sustain a strong cash position, generate positive free cash flow, and allot additional sources in the go-to-market and product development lines to attain a positive adjusted EBITDA in 2017. The company expects to generate 30% revenue growth in software and services this fiscal year. Per BlackBerry, with an enhanced operating model, loss per share should be around 15 cents. The Zacks Consensus Estimate for fiscal 2017 currently hints at a loss of 43 cents per share.

Our Take

Blackberry (TO:BB) has suffered in the mobile phone handsets market due to high competition from brands such as Apple Inc. (NASDAQ:AAPL) and Samsung Electronics (KS:005930) Co. Ltd. Despite new launches like BES12 and Privy, the company’s hardware segment such continues to underperform. Blackberry has been trying to make changes to its business model by focusing more on security software and services. The company’s CEO expects growth to be mainly driven by the software and services segment. Blackberry’s revenues in the software segment, excluding IP licensing, have more than doubled in the reported quarter. The Zacks Consensus Estimate for fiscal 2017 revenues currently stands at $1,763 million. We expect the company to gain from consolidating its software and services segment, which would eventually turnaround its performance.

Other Stocks to Consider

Some better-ranked stocks in the telecom sector include Mobile TeleSystems PJSC (NYSE:MBT) and NTT DoCoMo Inc. (NYSE:DCM) sporting a Zacks Rank #1 (Strong Buy).