BlackBerry maintains focus on device profitability even as hardware revenues fall

BlackBerry's hardware business once again failed to live up to expectations in the latest quarter, but the company said it will continue to manufacture phones for at least the next nine months.

The Canadian company posted a $670 million net loss in the first quarter of its financial year, including a $501 million write-down of its smartphone business and $98 million in other charges. Aside from the onetime items, though, BlackBerry saw a $14 million profit.

BlackBerry rang up $166 million in hardware sales, beating analysts' estimates of roughly $162 million, but its $106 million in software revenues fell shy of estimates in the range of $117 million. The onetime dominant smartphone company posted $152 million in hardware revenues, well shy of analysts' estimates of roughly $200 million, and overall revenues of $424 million also disappointed.

CEO John Chen said the company expects to see 30 percent growth in the software and services businesses that it is increasingly focused on as its share of the smartphone market all but disappears.

"Our current plan calls for continued investments to expand our addressable markets and drive sustainable profitability and revenue growth," Chen said in prepared remarks. "Based on a more efficient operating model, we expect a non-GAAP EPS loss of around 15 cents, compared to the current consensus of a 33 cent loss. We also expect to generate positive free cash flow for the full year."

But Chen also said this week that BlackBerry still hopes to regain at least a toehold in the smartphone market it once reigned. Some analysts expect the company to leave the hardware business entirely as worldwide smartphone sales slow and margins winnow. But Chen said Wednesday at the company's annual investors meeting that while he doesn't believe devices will "be the future of any company," BlackBerry is maintaining its focus on making its devices business profitable.

"The device business must be profitable, because we don't want to run a business that drags onto the bottom line," said Chen, according to a Seeking Alpha transcript of the meeting. "We've got to get there this year."

BlackBerry is expected to bring two new mid-range phones to market, one of which could launch as soon as next month. And the company may decide in the coming months whether it will continue to manufacture phones.

For more:
- see this BlackBerry press release
- read this Seeking Alpha transcript

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