Why BlackBerry Shares Plummeted

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of BlackBerry (NASDAQ: BBRY  ) plunged by nearly 24%, then partially recovered to close down 17% after the smartphone maker announced preliminary fiscal second-quarter-2014 results. 

So what: Quarterly revenue is expected to come in at just $1.6 billion, badly missing average analysts' estimates, which called for sales of $3.06 billion. Meanwhile, BlackBerry's adjusted quarterly net loss will be in the range of $250 million to $265 million, or $0.47 to $0.51 per diluted share, also falling significantly short of expectations for an adjusted loss of $0.15 per share. 

That said, BlackBerry also stated that, as a consequence of weak device sales and "more intense competition" in its hardware business, it will report a primarily non-cash, pre-tax inventory charge of $930 million to $960 million. In addition, the company is laying off approximately 4,500 employees, or 40% of its workforce, as part of a restructuring effort aimed at reducing operating expenditures by 50% by the end of the fiscal first quarter 2015. As a result, BlackBerry's GAAP net loss is expected to be in the range of $950 million to $995 million, or $1.81 to $1.90 per share.

Now what: Today's results understandably came as a shock for investors who were looking toward BlackBerry's official quarterly announcement next Friday.

Management will have plenty of explaining to do then, but it seems safe to say that investors' focus will now shift to who might be interested in buying the various parts of BlackBerry's business going forward. However, I still think investors would be wise to tread lightly here, and remember, even that's not a sure thing.

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Read/Post Comments (5) | Recommend This Article (2)

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  • Report this Comment On September 20, 2013, at 6:13 PM, BEN0007 wrote:

    BBRY did not plunged by 45% . the low of the day was $8.01, I wish you get your facts right before publishing.

  • Report this Comment On September 20, 2013, at 6:19 PM, gettmoney wrote:

    damn..really, 45%...what stocks were you watching

  • Report this Comment On September 20, 2013, at 6:40 PM, TMFSymington wrote:

    @BEN0007, Good catch! Looks like there was a brief glitch in the daily range stats which has since been fixed. Consider it corrected.

    Fool on!

    Steve

  • Report this Comment On September 20, 2013, at 8:08 PM, OracleofOmahaha wrote:

    The 45% was incorrect. bbry only fired 40% of their employees.

  • Report this Comment On September 21, 2013, at 11:38 AM, bearbait0701 wrote:

    It'll probably be 45% by the end of Monday.

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