BlackBerry Ltd. Earnings: What to Expect Friday

BlackBerry (BB 3.21%) will release its quarterly report on Friday, and investors are bracing themselves for substantial losses from the technology company. Yet even though BlackBerry has effectively surrendered the high-end U.S. smartphone market to Apple (AAPL 0.64%) and Google (GOOGL 1.27%), CEO John Chen is crafting a strategy whereby the company can seek out more successful business niches, including enterprise software and lower-end handsets suitable for overseas markets, where it still it maintains a solid presence.

BlackBerry has made a huge effort to go after Apple iOS and Google Android products, with its BB10 OS and recent smartphones based on the system. Yet with far more limited financial resources than Apple, Google, or Microsoft (MSFT 1.65%), BlackBerry has to focus on its strongest areas, such as security. At the same time, investors hope that even after the recent failure of BlackBerry to go private, the company will find a way to sell itself or a substantial portion of its assets. Let's take an early look at what's been happening with BlackBerry over the past quarter and what we're likely to see in its report.

Stats on BlackBerry

Source: Yahoo! Finance.

Will BlackBerry earnings ever recover?
Analysts have had mixed views on BlackBerry earnings in recent months, widening their loss estimates for the quarter ended in February by $0.02 per share but narrowing their fiscal 2015 loss projections by about 5%. The stock, though, has done well, rebounding more than 45% since mid-December.

BlackBerry's third-quarter earnings report showed the disconnect between the company's results and its share-price movements. BlackBerry sold only 4.6 million phones during the quarter, and more than two-thirds of those were antiquated BlackBerry 7 devices, showing that the rollout of the BlackBerry 10 phones has been largely unsuccessful in dislodging Apple and Google operating-system dominance in the smartphone environment. Those results led to a 56% drop in revenue , and BlackBerry lost money even after adjusting for the huge $4.6 billion writedown of assets and charge for its restructuring efforts. Yet even though BlackBerry proved unable to find a buyer for its business, shareholders still sent the stock soaring after the report.

Investors have put their faith in Chen and his vision for the future. The CEO announced a reorganization that will emphasize enterprise services and messaging, as well as its QNX operating system, and BlackBerry made a deal with China's Foxconn to take on responsibility for the company's hardware manufacturing and development over a five-year period. BlackBerry has also been slimming down its operations, in January announcing plans sell off commercial real-estate holdings in order to free up cash for operational use.

The key to BlackBerry's future might well be its reputation for secure communications. In January, shares soared when the Defense Department said that it still had tens of thousands of staffers using BlackBerry devices. Yet that release didn't show any new sales of company devices, suggesting that the future might not be as bright for BlackBerry even with its security reputation. Still, when Facebook bought WhatsApp last month, many investors asserted that the demand for messaging services might lead to a similar buyout offer for BlackBerry. So far, that hasn't happened, and others are skeptical that BlackBerry will get a lifeline on the M&A front.

BlackBerry also got good news from the auto industry, beating out Microsoft in getting its QNX platform into Ford's in-car Sync system. With an estimated 7 million cars and trucks using Sync, BlackBerry's win could lead to a new growth opportunity.

In the BlackBerry earnings report, watch closely for signs of how Chen's vision for enterprise software and other initiatives will play out in terms of future guidance. Investors have bid up shares in expectation of great things, but if BlackBerry can't deliver, those gains could evaporate quickly.

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