Blackberry CEO John Chen’s quest to turn the once-giant phone maker into a much tinier mobile software outfit appears to have hit a snag last quarter as device sales plummeted far more quickly than anticipated.
The Canadian company said it sold only 600,000 phones in its fiscal fourth quarter, which ended February 29. That’s less than half the 1.3 million handsets sold a year earlier and a 14% drop from last quarter’s minimal sales.
By contrast, Apple sold almost 822,000 iPhones per day—a total of almost 75 million—in its fourth quarter.
Analysts had anticipated the company’s new Priv model, which runs on Google’s Android operating system, would give sales a boost versus last quarter. But Chen admitted he wasn’t able to close negotiations with key carriers, including Verizon Wireless, in time to get broad distribution.
Shares of Blackberry fell 8% to $7.45 during morning trading on Friday after the results were released, leaving investors with a 20% loss so far this year.
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On a conference call with analysts, Chen pointed to rising software sales, which more than doubled to $153 million. “Our overall Q4 performance was reasonably good,” Chen insisted during the call. “We made progress on all our strategic priorities.”
But with software still comprising less than a one-third of sales, the bottom line was that Blackberry took in only $464 million of revenue in the quarter, down 30% from a year ago and far below the average analyst estimate of $563 million. An adjusted net loss per share of three cents was slightly better than the 10-cent loss analysts anticipated.
Chen’s strategy to save the company from utter irrelevance is focused on the software side of the corporate mobility market. He’s been snapping up smaller software companies in an effort to create a broad suite of mobile offerings covering security, messaging, and management of devices to offset shrinking handset sales.
After speaking to analysts, Chen went live on CNBC where he conceded he might have to dump the entire handset business if he couldn’t eliminate its losses by later in the year, as he has promised. “If by September, I couldn’t find a way to get there, then I need to seriously consider being a software company only,” Chen said.
But with competition on all sides, it looks like investors are increasingly skeptical there will be much left of Blackberry when the transition is complete.
(Updated with Chen’s comment on CNBC)