BlackBerry’s shares tumbled the most since 2001 after the company reported a surprise loss and weak sales of a new touch-screen model, underscoring its challenges in competing directly with the iPhone and Android devices.
The company shipped 6.8 million smartphones last quarter, including about 2.7 million new BlackBerry 10 models — primarily its flagship Z10 touch-screen phone. Analysts had estimated total shipments of 7.5 million, with about 3.6 million BlackBerry 10 units. The Waterloo, Ontario-based company also blamed Venezuela’s currency controls for a portion of its quarterly loss because they hurt Latin American revenue.
BlackBerry is struggling to break out of its strength in keyboard phones, which are still popular among some lawyers and professionals but not as sought after as the iPhone or smartphones based on Google Inc.’s Android. Friday’s stock tumble more than wiped out its gains for the year, signaling that investors may have been too optimistic about BlackBerry’s ability to wage a comeback fight against touch-screen rivals.
“The run-up in the stock was overdone,” said Erik Gordon, a University of Michigan business professor. “The company now is a niche player for the declining segment that clings to a physical keyboard.”
BlackBerry shares plunged as much as 29 percent to $10.25, the biggest intraday decline since January 2001. Through Thursday, the stock had gained 22 percent this year.
BlackBerry’s loss last quarter was 13 cents a share, excluding some items, BlackBerry said in a statement. Analysts had estimated a profit of 8 cents on average, according to data compiled by Bloomberg. It reported sales of $3.07 billion for the period, which ended June 1, falling short of the $3.37 billion predicted by analysts.
“They missed on units, gross margin, earnings,” said Kevin Stadtler, president of Fort Worth, Texas-based Stadtler Capital Management, which owns about 45,000 BlackBerry shares. “It’s been a disappointing launch so far.”
BlackBerry’s flagship Z10 model was first introduced in the U.K. in late January before being rolled out in the following weeks in Europe and the U.S. The Q10, which has a physical keyboard, was introduced in April in some markets, though not in the U.S. until June. The model is meant to appeal to BlackBerry loyalists who prize the company’s qwerty keypads in a world where touch screens are increasingly dominant.
“A full quarter of BlackBerry 10 sell-in should have resulted in better results,” said Mark Sue, an analyst at RBC Capital Markets who has the equivalent of a hold rating on BlackBerry shares.
BlackBerry also faces price pressure in regions such as Latin America and south Asia, where low-cost Asian manufacturers are flooding the market with devices that run on Android.
“BlackBerry 10 is still in the early stages of its transition,” chief executive officer Thorsten Heins told analysts Friday on a conference call. “In fact, we are only five months into what is the launch of an entirely new mobile computing platform.”
BlackBerry’s installed base of subscribers fell to 72 million worldwide from 76 million last quarter. That followed a drop from 79 million in the previous period.
Currency restrictions in Venezuela, a key market for BlackBerry, contributed to a 6 percent decline in Latin American revenue, the company said. It also reduced earnings per share by 10 cents. Without that, the company would have been closer to the break-even point, meeting its previously announced projections for the quarter, BlackBerry said. The company said it expects another operating loss this quarter.
Venezuela’s government has limited access to dollars with currency controls over the past decade, making it difficult for companies with foreign headquarters to repatriate cash at the official exchange rate. The country has devalued its currency five times over the past nine years, most recently when it weakened the exchange rate by 32 percent to 6.3 bolivars per dollar on Feb. 8.
BlackBerry faces an uphill battle to claw back market share lost to rivals such as Apple and Samsung Electronics Co., which uses Android. BlackBerry’s share of the global smartphone market shrank to 2.9 percent last quarter from 6.4 percent a year earlier, according to research firm IDC.
Heins has squeezed more than $1 billion in savings from BlackBerry since taking over in January 2012 by cutting 5,000 jobs, eliminating six of 10 manufacturing sites and even selling one of the company’s corporate jets.
Investors, initially skeptical of Heins’ appointment, had fueled a rally in BlackBerry shares in recent months. Through Thursday, the stock had more than doubled since reaching a nine-year low in September.