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Why BlackBerry Shares Plummeted

By Steve Symington - Sep 20, 2013 at 5:23PM

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Is this meaningful? Or just another movement?

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 (BB 1.50%) 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.

Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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