BlackBerry's Q2 Earnings Beat Was Aided By Very Large Write Downs

BlackBerry Ltd (NASDAQ: BBRY) missed the F2Q sales expectations and its non-GAAP EPS beat was helped by very large write-downs, Goldman Sachs’ Simona Jankowski said in a report. He maintained a Sell rating on the company, with a price target of $6.

BlackBerry reported its August quarter sales at $352 million, short of the GS and Street estimate of $392 million. The shortfall resulted from lower hardware [handset] revenues, with the company shipping merely ~400k units, versus expectations of 461k units, analyst Jankowski mentioned.

Write-Downs During The Quarter

BlackBerry posted non-GAAP EPS at $0.00, beating the GS estimate of ($0.06) and Street expectation of ($0.05). The company recorded massive write-downs, including an inventory write-down of $96 million.

Looking Ahead

BlackBerry announced its exiting from the hardware business, following after a deadline to reach profitability by September. The company also indicated that it would instead license its software and brand to third parties for a per-device royalty.

BlackBerry raised its FY17 non-GAAP EPS guidance from ($0.15) to ($0.05)-$0.00. Jankowski raised the EPS forecasts for FY17, FY18 and FY19 from ($0.14) to $0.00, from ($0.22) to ($0.08) and from ($0.20) to ($0.04), despite significantly reducing the revenue forecasts. The EPS estimates have been raised to reflect lower opex and mix.

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