BlackBerry revenues fall below $1bn but John Chen sees signs of recovery

Blackberry Q10

Struggling smartphone maker BlackBerry saw its quarterly revenues fall below $1bn (£601m) for the first time in seven years in the three months to March, recording its ninth successive quarter of operating losses and ending its fiscal year with net losses of $5.8bn.

The company recorded revenue on sales of just 1.3m of its new BB10 phones, though it sold 3.4m of its older BB7 phones as customers stuck to the older model that drove it to success. Operating losses were $537m, and net losses $423m.

The company's shares moved up 4% in pre-market trading as the losses were smaller than had been expected, and revenue in the US slightly higher than analysts forecast.

John Chen, recruited in November as chief executive to try to turn the company around, said he was "very pleased" with progress and that "we have significantly streamlined operations, allowing us to reach our expense reduction target one quarter ahead of schedule."

He also told Reuters that the company was working on high-end keyboard-based smartphones to appeal to "keyboard aficionados" in the next 18 months.

He is also considering ways to generate more value from the BlackBerry Messenger (BBM) software, presently available for free on BlackBerry, Apple and Android devices. The purchase by Facebook of messaging app WhatsApp for $19bn has piqued interest in the potential of BBM – though the chief of that division left BlackBerry recently, and its software chief is heading to Apple.

Despite a cash outflow of $553m during the quarter, Chen said that the company was on a "sound financial footing", with $2.7bn of cash and equivalents.

Chen has laid off staff, sold offices and land, and outsourced the manufacture of handset as part of a retrenchment from the consumer market to focus on its strongest markets among government and business users. Operating expenses were halved from the start of the fiscal year, and the number of phones sitting unsold with retailers – known as "channel inventory" – reduced by a third.

BlackBerry has fallen far from its peak at the end of 2010, when its revenues hit $5.5bn in a single quarter and it claimed 80m users for its platform. Its total revenue for the past four quarters were just $6.8bn. Though it was one of the first companies to offer a smartphone, and leant on its powerful email encryption as a selling point, the rise of Apple's iPhone and phones running Google's Android software has seen its unique selling points eroded.

The company now faces a problem in interesting buyers in its BB10 platform, launched in January 2013 by former chief executive Thorsten Heins but given a frosty reception by mobile networks and customers. Many have preferred to stick with the older BB7, which has outsold the BB10 models in every quarter since its release. Most of BlackBerry's losses for 2014 are due to massive writedowns on unsold BB10 handsets.

Despite a $1bn debt financing ahead of Chen's appointment, the company is still losing key customers among corporations. However BlackBerry was able to tout the US Department of Defence having cleared BB10 for use on the Pentagon's networks.

BlackBerry's headline revenues are still highly dependent on its handset sales, but those have now fallen to a level not seen since summer 2006, while the quarterly revenues were the same as in the three-month period before the launch of Apple's iPhone. For the past two quarters the majority of its revenues have come from services, where it provides its BlackBerry Enterprise Server software to corporate customers to handle BlackBerry handsets.

Meanwhile the company's former consumer strongholds in the US, UK and Asia all showed signs of erosion.

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Powered by Guardian.co.ukThis article was written by Charles Arthur, technology editor, for theguardian.com on Friday 28th March 2014 12.53 Europe/London

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