BlackBerry Cuts Loss and Sees Rising Sales; Shares Jump

BlackBerry Ltd. Unveils The Square-Screened Passport Smartphone
Hannah Yoon/Bloomberg via Getty Images
By Euan Rocha and Alastair Sharp

TORONTO -- BlackBerry (BBRY) reported a smaller quarterly loss on Friday and flashed encouraging signals about its hard-pressed smartphone business as well as its software and services sales, spurring a 7 percent jump in its shares.

The Canadian company, a smartphone pioneer pushed to the margins by Apple's (AAPL) iPhone and devices running Google's (GOOG) Android software, is now focusing more on software and services than on hardware as it works through a drawn-out turnaround.

On the services front, the company reported a huge number of conversions into its heavily promoted new mobile device management platform in its second quarter. But BlackBerry's hardware unit also offered hopeful news, posting an adjusted profit for the first time in five quarters, helped by lower manufacturing costs and strong demand for its low-end Z3 handsets in emerging markets.

The Waterloo, Ontario-based company notched revenue growth from the previous quarter in North America, but sales slipped elsewhere. Its total revenue was down more than 40 percent from a year earlier.

"Broadly speaking, they're doing the right things ... but that revenue number is getting real small," said BGC Partners analyst Colin Gillis.

BlackBerry shares were up 7.6 percent at C$11.70 on the Toronto Stock Exchange and up 7.4 percent at $10.51 on Nasdaq.

John Chen, who became BlackBerry's chief executive officer in November, said the company has already taken 200,000 orders for its new squared-screened Passport smartphone, which went on sale on Wednesday and sold out on (AMZN) within six hours.

In his turnaround plan, Chen has moved rapidly to cut costs, sell certain assets and strengthen the company's balance sheet. He said revenue declines are likely near a nadir, with growth likely to begin in calendar 2015 with the sales of new products and services.

Software Growth Eyed

Chen told analysts and reporters on a conference call that he expects software revenue to double next year, from around $250 million in the current fiscal year, as the company wins converts to its mobile device management platform, BlackBerry Enterprise Service 10, also known as BES10.

The platform allows companies and government agencies to manage and secure not just BlackBerry devices running on their networks, but also Android, Windows and iOS-based phones and tablets.

BlackBerry said it issued 3.4 million licenses for the BES10 platform in its second quarter, a sharp increase from the previous quarter, and may end a promotional program early due to its success. A quarter of the license signups came from rival mobile device managers, it said.

"On the bright side, we're encouraged by the company's growth in enterprise software licensees and aggressive cost-cutting measures to right-size the business," Morningstar (MORN) analyst Brian Colello said.

The success of Chen's turnaround plan depends to a large degree on whether the company's next BES upgrade helps boost sales. The new BES12 software is set for a mid-November launch.

Quarterly Results

BlackBerry reported a net loss of $207 million, or 39 cents a share, for its second quarter ended Aug. 30. That compared with a year-earlier loss of $965 million, or $1.84 a share.

Revenue was $916 million, versus $1.57 billion a year earlier.

Excluding one-time items such as charges for restructuring and a change in the fair value of debentures, the loss was 2 cents a share. On that basis, analysts polled by Thomson Reuters I/B/E/S were expecting a 16-cent loss.

"Our workforce restructuring is now complete, and we are focusing on revenue growth with judicious investments to further our leadership position in enterprise mobility and security," Chen said in a statement.

The company said it doesn't expect its cash balance to drop below $2.5 billion in either the current quarter or the next one. Cash burn has worried investors despite a capital infusion provided by major shareholder Fairfax Financial last November.

-With additional reporting by Allison Martell.

10 Signs You Are Headed Toward Financial Ruin
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BlackBerry Cuts Loss and Sees Rising Sales; Shares Jump

The first step is to know how much you currently owe on each credit card, said Gail Cunningham, spokesperson for the National Foundation for Credit Counseling, the Washington, D.C.-based national nonprofit financial counseling organization.

If you don't know, you're doing personal finance wrong.

"Burying your head in the financial sand won't solve anything -- there are no answers down there," she said.

Reviewing your credit report and score in the past 12 months can point you toward any discrepancies or errors which you can dispute easily. Ensuring that your credit score is higher than 600 important and will enable you to receive lower interest rates when it comes to buying a car or house or obtaining other loans. Your creditworthiness is ranked from 300 to 850.

Another indicator that you are heading for trouble is if you find yourself near the maximum amount allowed on your lines of credit. If you're considering applying for new lines of credit because the existing ones are maxed out, you'll only make matters worse, NFCC's Cunningham said. "The last thing you need is more credit," she said. "Instead, probe to see why you are relying so strongly on credit cards to support your lifestyle."

It's important to minimize "percentage utilization" and maximize "credit available," said Kevin Gallegos, vice president of the Phoenix operations with Freedom Financial Network, a company which helps consumers with debt issues.

"If you have a credit card with a limit of $10,000, and you owe $3,500 on it, that's 35 percent utilization," he said. "Anything over 35 percent is considered is high, a warning sign that you may be living beyond your means and can impact credit scores."

Consumers who are current on their vehicle payment are a step ahead of their counterparts; if you're behind, you're on a rocky financial road.

If you are facing a money crunch, prioritize your bills, including making payments for your apartment or house and your monthly auto loan.

Another indicator that you are nearing serious financial issues is you have overdrawn on your checking account more than twice in the past 12 months. The overdraft fees are only adding to your dilemma. Instead, use free budgeting software or load an app from your bank that allows you to check your balance as often as you need to, even if it is daily. Some bills take longer to clear, so your current balance may not reflect that.

If you lack an emergency savings account, you could be headed for disaster if you run into car problems, lose your job or have a minor accident that prevents you from working. Only 51 percent of Americans have more emergency savings than credit card debt, according to a (RATE) report. The survey also found that 28 percent of people have more credit card debt than emergency savings, the highest percentage in the past four years while 17 percent have neither emergency savings nor credit card debt.

"Since the recession, people recognize how important emergency savings is," said Bankrate's McBride. "They have less appetite for credit card debt. Despite that recognition, people have had a difficult time making headway for savings in an environment where income is stagnant."

Receiving collection calls and notices is another sign that you aren't living within your means. Many creditors are willing to negotiate your payment amount or waive some fees temporarily so consumers who try to seek a remedy before their debt goes into collection are facing less damage to their credit score.

Consumer spending can easily wind up being bad debt, which is debt that is used for the consumption of goods with little to no long-term value or goods with diminishing value, said Jason Ayala, a private wealth adviser in Phoenix for Ameriprise (AMP), the financial services company.

"An example of bad debt is carrying credit card debt that was used to subsidize a standard of living that exceeds your income," he said. "If used appropriately, debt can be a very powerful and beneficial tool -- if not it can derail even the best laid financial plans."

Even if it was a one-time occurrence, applying for a credit card cash advance, payday loan, title loan or borrowing from your 401(k) or IRA in the past 12 months is a sign that you need to regain control of your finances.

"Adding new debt on top of old is a financial death trap," Cunningham said. "Balances grow, and you end up paying interest on the interest. Digging out of debt is impossible unless this practice stops."

If you are spending more than 28 percent of your gross salary paying rent or your mortgage that hampers your ability to maintain a moderate standard of living. Some lenders approved mortgages for homeowners to borrow up to 35 percent of their income during the past decade, but experts advise against spending that close to the threshold. Consider refinancing your mortgage, obtaining a roommate or at least cutting back on other bills or expenses. The 28 percent mark is a good rule of thumb, but it may vary depending on where and how you live, Gallegos said.

"Someone who lives in the heart of San Francisco or Manhattan and doesn't own a car may have a higher percent for the home category, but a lower allocation for transportation," he said.

Being able to maintain your current lifestyle without using your credit cards is a good sign. In July, total consumer revolving debt, which includes credit card debt, rose by 7.4 percent from June.

"This is a time when consumers can and should be saving more of their personal income compared to driving up debt," Gallegos said.

Consumers should aim to save 10 percent of their income.

Living within your means on a daily basis and using credit cards only in real emergencies is the best option.

"Paying down credit card debt is one of the best investments you could ever make since the effective rate of return easily can approach 20 percent," he said. "In addition, having no credit card debt is in itself a financial cushion. It will require strict discipline, belt-tightening and a revision of your goals."

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