BlackBerry Reports Surprising Q1, Adds Amazon Appstore Deal

By one measure, BlackBerry (BBRY) chairman and chief executive John Chen’s seven months of cost-cutting and prioritizing appear to be stabilizing the troubled mobile device maker. The company surprised Wall Street by posting a $23 million, or 4 cents a share, profit for Q1 2014, a stark about-face from the $84 million, or 16 cents a share, loss it suffered a year ago.

Still, BlackBerry’s stark revenue downturn for the period made it clear the company’s ability to keep pace with its sales totals of a year ago remains in doubt, despite its newfound posture as a leaner, more efficient version of itself. While sequential sales fell only 1 percent, or $10 million, to $966 million for the period, the 69 percent revenue tumble from this time last year is striking. Overall, BlackBerry’s revenue breakdown for the period was 39 percent hardware, 54 percent services and 7 percent software and other sources.

BlackBerry’s streamlining moves notwithstanding, the vendor’s smallish profit for Q1 technically resulted from accounting adjustments in which it included non-cash income and restructuring charges. Excluding those items, BlackBerry would have lost $60 million, or 11 cents a share, for the quarter.

The vendor closed the quarter with $3.1 billion in cash, a $429 million bump from the prior period, owing mostly to a real estate sale and a tax refund, without which it would have burned through another $255 million in cash.

BlackBerry said it sold about 2.6 million of its smartphones to end customers during Q1, a precipitous drop from 3.4 million its recorded in Q4 2013. Despite BlackBerry’s struggle to sell smartphones, Chen denied he’s interesting in selling off the company’s handset division.

He said BlackBerry’s “performance in fiscal Q1 demonstrates that we are firmly on track to achieve important milestones, including our financial objectives and delivering a strong product portfolio. Over the past six months, we have focused on improving efficiency in all aspects of our operations to drive cost reductions and margin improvement. Looking forward, we are focusing on our growth plan to enable our return to profitability.”

Going forward, Chen still is sticking to his previously stated goal of gaining break-even cash flow by fiscal 2015 and profitability the following year.

Amazon Appstore deal

Earlier this week, BlackBerry landed a deal with Amazon (AMZN) that gains it access to the vendor’s Appstore—a move the device maker believes will expand its lineup of mobile apps and, correspondingly, up handset sales in the process. The deal in turn affords Amazon the ability to tap into BlackBerry’s extensive customer base.

BlackBerry currently offers some 130,000 apps through its online store, a figure that pales next to Apple’s (AAPL) and Google’s (GOOG) reported 1.3 million apps housed in their stores. Amazon’s Appstore showcases about 240,000 Android mobile apps.

Under terms of the agreement, BlackBerry will preload Amazon's Appstore application on its devices this fall when it releases its BlackBerry 10.3 OS upgrade. For the time being, BlackBerry customers will have to download apps from the Amazon Appstore.

Chen said the Amazon move enables it to focus on developing security and productivity applications for its targeted enterprise and government market.

“Making the Amazon Appstore available on BlackBerry 10 devices will help BlackBerry continue to meet two essential needs—greater app availability for our smartphone users and enhanced productivity solutions for enterprises,” he said.