This quarter I am carrying on with the format which I started with for Q3FY2016. Below is a table outlining the main highlights of the Earnings Report along with the comparisons between last quarter and Q2FY2016. Following the table, you will see my Bullish (good points) and Bearish (bad points) to the report. Additionally, keep in mind I am using Non-GAAP numbers, mainly because those are the ones which BlackBerry focuses on. Finally, there were a number of announcements during the earning call which I’ll discuss near the end of the article.
Please note the following disclaimers: firstly, I am not a financial expert. I have an interest in the subject and therefore have looked into it but do not base any financial decisions from this article. Be sure to consult a certified expert before doing anything relative to financial options. Next, I am a shareholder and therefore am quite interested in how the company is conducting its business. Finally, all information in this article is taken from the company’s financial reports on their website. There is no insider information at work here and anyone can make the same analysis as I have done.
Here are the figures from this quarter:
The Bull Points
To start off with the lone good(ish) point we head back to Net Income yet again this quarter which is up again despite revenue declining yet again. This is obviously because of the increased sales in software and services which is a high-margin segment. BlackBerry has continued to experience growth in their area which is helping the bottom line and Chen’s turnaround strategy.
The Bear Points
I think I sound like a broken record but REVENUE! Until BlackBerry sorts out its constantly declining revenue, the street will continue to question whether or not that the turnaround is actually happening. Seriously, I cannot write anymore on this topic because its been covered all before.
- New CFO – James Yersh has left the company for personal reasons and will be succeeded by Steven Capelli as CFO. Capelli has 25 years of executive experience and has worked with Chen during his time at both Pyramid and Sybase. Yersh will stay around until the end of October.
- Farewell Hardware division – John Chen has stuck to his promise that if he could not get the hardware division profitable by now then he would be forced to shut it down and that is what he has done. However, that does not mean BlackBerry devices are gone but we may see actually more BlackBerry devices out there. Chen’s strategy is to outsource their software to device manufacturers and have them actually make the physical devices. We have seen this with the DTEK50, arguably half of the Priv was outsourced and the impending DTEK60 is in the same boat. So BlackBerry devices will still be around, they just won’t be made by BlackBerry.
- Joint Venture with PT BB Merah Putih – BlackBerry and PT BB Merah Putih have announced a joint venture where BlackBerry will be licensing software to PT BB Merah Putih for their devices. This is just the first in hopefully many to come contracts of Chen’s new strategy.
Many of you will not like this but the outsourcing of BlackBerry hardware had to happen. I have actually been saying this for a few years now; however, I was hoping for a partnership with Sony. To be frank, BlackBerry is too small of a company to be competing in the saturated smartphone market now. The only physical product the company produced was smartphones. With that there were no scales of economies for the company to lower its costs. Think of how many components there are to a smartphone screen, graphics processors, RAM, memory, etc. Other companies make those same components for other products such as TVs, tablets or audio components. Yet BlackBerry was left with just phones. In today’s marketplace they just cannot compete that way. In the end, as I have said before John Chen was brought in to save BlackBerry not necessarily the BlackBerry and he just did it.