BlackBerry (BBRY)’s shares tumbled the most since 2000 after the company reported a surprise loss and weak sales of a new touch-screen model, underscoring its challenges in competing directly with the iPhone and Android devices.
The company shipped 6.8 million smartphones last quarter, including about 2.7 million new BlackBerry 10 models -- primarily its flagship Z10 touch-screen phone. Analysts had estimated total shipments of 7.5 million, with about 3.6 million BlackBerry 10 units. The Waterloo, Ontario-based company also blamed Venezuela’s currency controls for a portion of its quarterly loss because they hurt Latin American revenue.
BlackBerry is struggling to expand beyond keyboard phones, which are still popular among some lawyers and professionals but not as sought-after as Apple Inc. (AAPL:US)’s iPhone or smartphones based on Google Inc. (GOOG:US)’s Android. Yesterday’s stock tumble more than wiped out its gains for the year, signaling that investors may have been too optimistic about BlackBerry’s ability to wage a comeback fight against touch-screen rivals.
“The company now is a niche player for the declining segment that clings to a physical keyboard,” said Erik Gordon, a University of Michigan business professor.
BlackBerry shares plunged 28 percent to $10.46. It was the biggest decline since April 12, 2000, when stocks were crashing after the dot-com bubble burst. The fall more than erased a gain this year of 22 percent before yesterday.
BlackBerry’s loss last quarter was 13 cents a share, excluding some items, BlackBerry said in a statement. Analysts had estimated a profit of 8 cents on average, according to data compiled by Bloomberg. It reported sales of $3.07 billion for the period, which ended June 1, falling short of the $3.37 billion predicted by analysts.
“They missed on units, gross margin, earnings,” said Kevin Stadtler, president of Fort Worth, Texas-based Stadtler Capital Management, which owns about 45,000 BlackBerry shares. “It’s been a disappointing launch so far.”
BlackBerry’s flagship Z10 model was first introduced in the U.K. in late January before being rolled out in the following weeks in Europe and the U.S. The Q10, which has a physical keyboard, was introduced in April in some markets, though not in the U.S. until June. The model is meant to appeal to BlackBerry loyalists who prize the company’s qwerty keypads.
“A full quarter of BlackBerry 10 sell-in should’ve resulted in better results,” said Mark Sue, an analyst at RBC Capital Markets who has the equivalent of a hold rating on BlackBerry shares.
BlackBerry also faces price pressure in regions such as Latin America and South Asia, where low-cost Asian manufacturers are flooding the market with devices that run on Android.
“BlackBerry 10 is still in the early stages of its transition,” Chief Executive Officer Thorsten Heins told analysts yesterday on a conference call. “In fact, we are only five months in to what is the launch of an entirely new mobile computing platform.”
BlackBerry’s installed base of subscribers fell to 72 million worldwide from 76 million last quarter. That followed a drop from 79 million in the previous period.
Because of currency controls in Venezuela, no cash was received in the quarter from that country’s services revenue, the company said. That contributed to a 6 percent decline in Latin American revenue.
The situation also reduced BlackBerry’s earnings by 10 cents a share. Without that, the company would have been closer to the break-even point, meeting its previously announced projections for the quarter, BlackBerry said. Management expects another operating loss this quarter.
Venezuela’s government has limited access to dollars with currency controls over the past decade, making it difficult for companies with foreign headquarters to repatriate cash at the official exchange rate. The country has devalued its currency five times over the past nine years, most recently when it weakened the exchange rate by 32 percent to 6.3 bolivars per dollar on Feb. 8.
Procter & Gamble Co (PG). found itself facing as much as $275 million in aftertax charges from the February devaluation, the Cincinnati-based company said that month.
BlackBerry faces an uphill battle to claw back market share lost to rivals such as Apple (AAPL) and Samsung Electronics Co. (005930), which uses Android. BlackBerry’s share of the global smartphone market shrank to 2.9 percent last quarter from 6.4 percent a year earlier, according to research firm IDC.
Heins has squeezed more than $1 billion in savings from BlackBerry since taking over in January 2012 by cutting 5,000 jobs, eliminating six of 10 manufacturing sites and even selling one of the company’s corporate jets.
Investors, initially skeptical of Heins’s appointment, had fueled a rally in BlackBerry shares in recent months. Until yesterday, the stock had more than doubled since reaching a nine-year low in September. At the same time, short interest -- investments betting the stock would fall -- rose to record levels ahead of the earnings report.
“The run-up in the stock was overdone,” Gordon said.
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