BlackBerry posts surprise profit but misses revenue estimates

Brendon Thorne/BLOOMBERG - Thorsten Heins, chief executive officer of BlackBerry, speaks during the launch of the BlackBerry Z10 smartphone in Sydney, Australia, on Monday, March 18, 2013.

BlackBerry, fighting to stay relevant in the booming smartphone market, announced Thursday that it had turned a surprising profit in its most recent quarter and that initial sales of its newest phone were strong.

BlackBerry loyalists snapped up 1 million Z10 smartphones during the fiscal quarter ended March 2 — matching modest sales expectations. And the company earned a small profit, $98 million, during its fiscal fourth quarter, the first quarterly profit in a year.

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“Getting back to a profitable quarter is just the starting line, not the finish line,” said Thorsten Heins, who was appointed chief executive in January.

BlackBerry, which changed its name from Research in Motion earlier this year, has been struggling to secure its position in the smartphone market it once dominated. Company executives have said they would be satisfied with capturing enough of the market to only trail Apple’s iPhone and smartphones made by Google’s Android software.

But that may be a tall order, and investors don’t appear convinced. The company’s stock fell about 1 percent Thursday after initial enthusiasm waned.

BlackBerry is betting on the success of the Z10 and the unreleased Q10 to secure that position. The Q10 includes BlackBerry’s signature keyboard and will appeal to existing BlackBerry users, former users and business customers, Heins said.

But a launch date for the Q10 hasn’t been set, and potential customers may be forgoing the Z10 while they wait for its release.

Despite upbeat indicators, BlackBerry’s results also reflected lingering problems. The company posted a $1.2 billion loss for the fiscal year. Revenue fell 36 percent during the fourth quarter to $2.7 billion and fell 40 percent for the fiscal year to $11 billion. BlackBerry shed 3 million subscribers during the quarter, leaving it with just 76 million overall.

Although the Z10 may have gotten off to a good start overseas, it was far from a spectacular debut and may not be sustainable, analysts said. BlackBerry’s new phone didn’t become available in the United States until last week and sales have been “poor,” said analyst Kevin Smithen of Macquarie Securities.

It is still a longshot that the company will be able to take market share from competition such as Apple’s iPhone, analysts said. But this report — and the small quarterly profit the company eked out — may prove that BlackBerry can survive as a niche product, they said.

This could take some pressure off BlackBerry to lure customers away from its biggest competitors, said Shaw Wu, a technology analyst with Sterne Agee.

“They’ll want to grow the platform and reclaim at least part of its previous glory,” Wu said. “But the important thing is that they’re making money.”

The return to profitability may close a rough chapter in the company’s history, a transition punctuated by the company’s announcement Thursday that co-founder Mike Lazaridis will leave the company’s board; he resigned as co-chief executuve last year.

Meanwhile, Heins said BlackBerry will attempt to diversify beyond phones in the future. But it is unclear whether BlackBerry would enter another crowded market — such as tablets — or simply license its new operating system to other companies.

“Our vision is to expand from being a smartphone company to being a leader in mobile computing,” Heins said.

 
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