Analysts: Don't expect BlackBerry to quit hardware just yet

BlackBerry may still be struggling to find a market for its Priv handset, but analysts don't expect the company to throw in the towel on its hardware business just yet.

The Canadian company, which posts its fiscal 2017 first quarter tomorrow, launched the Android-powered Priv last fall in an attempt to regain at least a toehold in the smartphone market it once dominated. But the company shipped just 600,000 phones during its fiscal 2016 fourth quarter, falling well short of analysts' expectations.

It's unclear whether BlackBerry has managed to somehow boost Priv sales in the most recent quarter. In fact, CEO John Chen is likely to discuss plans for newer models of the phone, said Nicholas McQuire, vice president of enterprise at CCS Insight.

"We don't expect BlackBerry to announce anything major regarding its hardware business this quarter, but of course all eyes will be on the performance of the Priv in the quarter following a very poor performance last quarter," McQuire told FierceWireless via email. "We do however expect Mr. Chen will reveal more details about newer forthcoming models of the Priv, especially a corporate-focused mid-range device which he has suggested previously would be part of the strategy for hardware this year."

But if Priv sales remain sluggish, BlackBerry may feel an increased sense of urgency to shut down its manufacturing business in the coming months, Wells Fargo Securities analysts observed recently in a research note. The move would mark the end of an era for the one-time king of the mobile enterprise, but it would also boost BlackBerry's bottom line substantially.

"We examine a number of options for the hardware business but believe shutting it down would be most value-creating long-term," Wells Fargo opined. While the decision would see the company's revenues for the fiscal year slide to $1.07 billion from an estimated $1.91 billion, it would drastically improve both gross margin and operating margin. Wells Fargo predicted the move would result in earnings per share for the fiscal year of 27 cents, up from its current estimate of a 10-cent loss, and "would reduce balance sheet risk and volatility as well."

Meanwhile, analysts will be focused on BlackBerry's software sales and service revenues, which the company has increasingly focused on for the last few years.

"Overall, a big part of the story in the earnings will also likely be its software business, which has had a positive 2016," according to McQuire. "We expect a similar performance in software this quarter as well as the firm shifts focus towards this part of the business."

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