BlackBerry has just declared its financial figures for its first quarter of 2016, which, at first glace, look like quite painful reading for the company. BlackBerry reports a net loss of $670 million for the year, which came about as a result of a $501 million writedown on the value of its handset business, a $57 million goodwill impairment payment, and $41 million worth of inventory writedowns, among a few other charges. As you might expect, this loss has again place the crosshairs over the company’s struggling smartphone hardware business, with some analysts now expecting that the division could be cast off.
The announcement declared that both smartphone and service-access fee revenues had come in weaker than expected, which will no doubt be a disapointment to the company after releasing its first Android flagship in October last year. The BlackBerry Priv was the company’s first attempt in the competitive Android market and the business has seen some decent revenue on the 500,000 various handsets that it sold this quarter, which have an average selling price of $290. Although this is down slightly on the 600,000 handsets sold in the previous quarter.
Despite the missed expectations, CEO John Chen has confirmed that BlackBerry plans to release two cheaper Android-based devices in July. Chen also signalled to investors that his top priority is to make the device business profitable, with a September deadline set for determining the future of the hardware division. BlackBerry isn’t done with smartphone hardware yet, but the company is certainly keeping a close eye on how important this division is to its wider business and profitability.
“We’re at a point where our business is extremely efficient and we no longer really are making any hardware. We are really a hardware design house.” – BlackBerry CEO, John Chen
The broader pictures doesn’t appear to be so bleak for the company. Despite the net loss, the company stock price rose by as much as 4.6 percent before settling at a 2 percent increase following the announcement. Total quarterly revenue was actually up 21 percent year-on-year, reaching 424 million for Q1 2016. BlackBerry appears to have been at least partically sucessful in cutting some of its running costs and improving profitability. In addition, software revenue came in much better than expected, up 21 percent from a year earlier. This growth is expected to continue into 2017, with software sales growth expected to rise to 30 percent over the coming years.
Overall, BlackBerry appears to be making the changes necessary to return itself to profitability, although the business appears to be comitted to changing over to primarily a software and service company. BlackBerry’s lingering questions over continued hardware development may well be settled this year, but that will of course all depend on the success of the products that it announces next month.