BlackBerry (NASDAQ:BBRY) reported mixed Q4 2016 earnings on Friday before markets opened. While BlackBerry delivered a beat on earnings, it missed heavily on revenue. BlackBerry reported a non-GAAP EPS of -$0.03 against analysts’ estimates of -$0.09, an impressive beat. But the miss on revenue was heavy. It reported revenue of $487 million against estimates of $563 million. While Mr. Chen termed Q4 performance as solid, the markets differed with him. The stock was down more than 8% in Friday’s trade and is down around 20% YTD.
Source: BlackBerry Stock Chart by amigobulls.com
BlackBerry saw a strong quarter on software front with software revenues growing 106% YoY, faster than mobility software market, to $153 million. For the full year, BlackBerry reported software revenue of $527 million, higher than the guidance of $500 million. BlackBerry expects software revenue to grow at 30% YoY for FY 17.
While software sales were strong, the hardware segment disappointed. BlackBerry shipped 600,000 units at an ASP of $315, a huge decline from last quarter, which saw hardware shipments of 700,000. BlackBerry blamed the softness in the high-end handset market and prolonged negotiations with Verizon for the significant decline in hardware sales.
While BlackBerry didn’t disclose Priv numbers, it must be on the lower end as ASP remained similar to last quarter. BlackBerry was able to reduce its hardware losses by half, but Mr. Chen had expected to break even in the devices division on the back of high margin Priv sales. However, the high retailing price of Priv has reduced the estimated number of handsets required to be shipped annually for the handset division to become profitable to 3 million units (at an ASP of around $300) from 5 million units earlier.
BlackBerry To Discontinue Its Handset Division?
But more importantly, later during the day, Mr. Chen drew a red line on hardware division by announcing that BlackBerry will exit handset market if it is not able to turn profitable by September this year. BlackBerry has repeatedly said that it will exit the handset market if it does not become profitable. And after dragging its feet after the failure of Passport and Leap devices, it appears to be walking the talk.
