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Canadian handset manufacturer BlackBerry Limited (BBRY - Analyst Report) reported highly disappointing financial results for the second quarter of fiscal 2014. Both the top and the bottom lines significantly fell below the Zacks Consensus Estimate.

The disappointing figures follow Blackberry’s announcement last week of its plans to cut 4,500 workforce. The announcement had come with a warning that it may report a huge second quarter operating loss. BlackBerry’s efforts for revival banking on operating platform BB10 also failed and so did its latest handset. BlackBerry currently has a Zacks Rank #3 (Hold).

Second Quarter Results in Detail

Adjusted net loss from continuing operations in the second quarter of fiscal 2014 was $914 million or $1.74 per share compared with a net loss of $84 million or 16 cents per share in the year-ago quarter. The adjusted net loss per share of $1.74 was also significantly wider than the Zacks Consensus Estimate of a loss of 50 cents per share.  

Total revenue in the reported quarter was $1,573 million, down 48.8% year over year. Revenues also missed the Zacks Consensus Estimate of $1,743 million. Segment wise, Hardware revenues contributed approximately 49%, Services revenues accounted for 46% and the remaining 5% came from Software and other sources.

In the reported quarter, BlackBerry sold 3.7 million smartphones. Quarterly operating loss was $1,432 million compared with an operating loss of $169 million in the year-ago quarter.

In the second quarter of fiscal 2014, BlackBerry generated $486 million of cash from operations compared with $1,135 million in the prior-year quarter. Free cash flow in the reported quarter was $291 million compared with $895 million in the year-ago quarter. Cash and marketable securities at the end of the second quarter were $2,344 million compared with $2,654 million at the end of fiscal 2013. The balance sheet of BlackBerry remains debt free.

Our Take

Ever since Apple Inc.’s (AAPL - Analyst Report) iPhone hit the market, BlackBerry and Nokia Corp. (NOK - Analyst Report) have been facing competitive pressures, which BlackBerry in particular have found tough to deal with. The situation further aggravated once Google Inc. launched its Android software and several handset manufacturers adopted that operating system.

Meanwhile, BlackBerry has decided to go private by divesting its entire stake to a consortium headed by Toronto-based insurance company Fairfax Financial Holdings Limited for $4.7 billion or $9 per share. Moreover, the company has also decided to offer its popular BBM service to Android and iPhone users.

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