Summary
Company badly missed revenue estimates.
Hardware revenues continued to fall.
Priv has failed, time to move on.
A couple of weeks ago, I detailed how it was time for BlackBerry (NASDAQ:BBRY) to make a decision on the future of its hardware business. With the segment losing money and unit sales being lackluster, the Priv's launch was in focus. Well, after the company announced another awful quarter, it is time for BlackBerry to eliminate this struggling division, as well as its out of touch CEO.
On Friday, BlackBerry released its fiscal Q4 results, highlighted by an awful revenue figure that set a multi-year quarterly low. Last quarter, John Chen talked about the "well received" launch of the Priv, and how the device should lead to a sequential rise in hardware revenues. Well, in the above Q4 release, there was no mention of the Priv in the main body of the report, a shocking development for this highly talked about device.
Hardware revenues plunged more than $30 million sequentially, and I'm not sure there is much to celebrate going forward. A key item to watch has been purchase order commitments, and they plunged from $298 million to $162 million sequentially. How can BlackBerry sell phones if it is not ordering them? The obvious answer is that Priv sales have fallen well short of expectations.
It was only a year or two ago that CEO John Chen was looking to grow revenues when the company was around $960 million. In the latest quarter, non-GAAP revenues did not even hit $500 million, with GAAP revenues only being $464 million. Nearly a third of the company's top line still sits in service access fees, which are heading to zero, and another 40% lies in the decaying hardware business.
While eliminating the hardware business will send revenues much lower, it is time for BlackBerry to admit the business has no future. The Priv did not sell as well as hoped, with revenues falling well short of management's growth expectation. BlackBerry CEO John Chen continues to be out of touch with reality, so it is time for him to be held accountable for the business that keeps failing quarter after quarter. I believe that the hardware business should be axed, along with the man who just can't get results to improve.
