On Friday, March 28, 2014, Blackberry reported 4th Quarter, 2014 Results. In his opening remarks, John C. Chen, CEO informed his audience ” . . . [he is] extremely pleased . . . ” with the quarter results, which placed the business ” . . . slightly ahead . . . ” of objectives. I should note Chen alluded to an “8 Quarter Plan”, which was laid out in the Q3, 2014 Earnings Presentation, which was his first earnings call subsequent to taking over as CEO of the business.
By noon on Saturday, March 29, 2014, a lot of analyst commentary had been published on this earnings call. Most of the published copy focuses on the real impact of the earning surprise included in the results: Analysts estimated Blackberry would report a loss of $ .55 per share, but the actual reported loss amounted to $ .08. On the other hand, revenue was substantially below analyst estimates, coming in, for a first time since 2007, at less than a $1 Billion. Markets paid more attention to the revenue miss, and Blackberry’s stock dropped 7.07% for the trading day, closing at $8.41.
In my opinion, market response to Blackberry’s reported earnings revealed investor impatience with Chen’s plan to transform the business. Chen was “extremely pleased” with the results, but markets sold off on the stock. If this disconnect is not somehow repaired prior to Blackberry’s Q1, 2015 earnings call, “longs” like me should brace themselves for a repeat sell off.
Here are some points I put together as I listened to the webcast:
- Analysts clearly expected Blackberry to not only report a successful effort to substantially reduce the quarterly loss (the first objective of Chen’s 8 Quarter Plan), but also report a floor in corporate and consumer sales capable of fueling a $1 Billion + revenue run rate while the business continues to address its cash flow and profitability problems.
- Chen’s comments on the “Bold” Handset, and the soon to be released “Classic”, demonstrated precisely the type of highly reactive, flexible, “Ready, Fire, Aim” approach someone in his position needs to maintain. Unfortunately, subsequent to this call, and Chen’s appearances on CNBC and Bloomberg TV, a number of writers theorized how his remarks actually indicated a departure from his stated objectives to transform the business from a hardware mobile device handset manufacturer, into an enterprise ISV. Chen repeated, on a number of occasions, his willingness to sell products customers “ask for”, which, in my opinion, makes perfect sense.
- The Jakarta debut, scheduled for early April, should provide anyone following Blackberry with some highly valuable indication of whether Chen can shore up handset sales as he continues to address the task of transforming Blackberry’s sales force into a direct-to-enterprise team, and his channel partnerships into something more profitable for the business.
Chen clearly understands the need for specific focus on successfully attaining very near term future objectives. It would certainly help if analysts, and, perhaps, investors also dropped a big picture view for something a lot grittier and grimey — making it through the next few business quarters.
Disclaimer: I’m long Blackberry.
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