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Blackberry surprises everyone by making a profit

The company was expected to continue making a loss as it changes from hardware to services, but it managed to surprise everyone by reporting a net profit of €16.8 million in the latest quarter.

Blackberry CEO John Chen at the launch of the new Blackberry Z3 smartphone in Indonesia last month.
Blackberry CEO John Chen at the launch of the new Blackberry Z3 smartphone in Indonesia last month.
Image: Achmad Ibrahim/AP/Press Association Images

BLACKBERRY SURPRISED WALL Street by posting results that beat analyst’s expectations.

Shares rose almost 12% in premarket trading as CEO John Chen cut expenses quicker than expected.

The embattled smartphone company reported net income of $23 million (€16.8 million) for the three months ended 31 May. It had reported a loss of $84 million (€61.6 million) a year ago.

Excluding unusual items, its adjusted loss was 11 cents per share in the latest period. Analysts surveyed by FactSet expected a loss of 35 cents per share.

Revenue fell to $966 million (€709 million) compared with $3.07 billion (€2.25 billion) a year ago. Analysts expected $961.7 million (€705 million).

Shares rose 99 cents, or 11.9%, to $9.29 in premarket trading an hour before US markets open.

“We are getting very close to making money or at least break even on hardware. Not quite there yet, but close,” Chen said on a conference call with analysts.

It is the third quarterly results under Chen, who is de-emphasising the hardware business after last year’s launch of the BlackBerry 10 failed to spark a turnaround. The BlackBerry has been hammered by competition from the iPhone as well as Android-based rivals.

“He’s doing exactly what John Chen should be doing. He’s right sizing the business to fit demand. He is focused in the areas where he is still relevant. He’s cut partnerships to shore up weaknesses,” said Colin Gillis, an analyst at BGC Partners.

“If they can get this business where they are selling a million phones a month they’ll be a nice little niche. It will be a nice little profitable business.”

BlackBerry sold 2.6 million phones in the quarter and reported cash and investments of $3.1 billion (€227 billion).

Focusing on software

Chen said the company will launch a new keyboard smartphone model called the BlackBerry Passport in London in September followed by the previously announced Classic in November.

Chen, who is credited with turning around Sybase, a data company that was sold to SAP in 2010, has been putting more emphasis on BlackBerry’s mobile device management business, a collection of software that allows IT departments to manage different devices connected to their corporate networks.

He is also emphasising BlackBerry’s popular BlackBerry Messenger app that is now also available on Apple and Android devices. And he is trying to highlight Blackberry’s embedded QNX software systems, which are used in-vehicle infotainment systems and industrial machines.

BlackBerry recently announced that it is adding the Amazon Appstore to its phones. That will give users of the BlackBerry 10.3 operating system easy access to thousands more of the most popular Android apps and games. The struggling smartphone maker has been criticised for the lack of applications available for its devices.

BlackBerry announced last December that it’s entering into a five-year partnership with Foxconn, the Taiwanese company that assembles products in vast factories in China. Foxconn, known for its manufacturing contract work on Apple’s iPhones and iPads, will jointly design and manufacture most BlackBerry devices and manage inventory of the devices in an agreement that will offload much of BlackBerry’s manufacturing costs.

Chen has said for months that he’ll be happy to break even or make a small profit on the device business.

Read: Your next smartphone could have security features built into the glass >

Read: Amazon enters the mobile market by launching head-tracking smartphone >

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