BlackBerry shares jump by more 13% after posting smaller loss than expected

Canadian phone business says its gross profit margin is up as hopes are raised that CEO can deliver on turnaround pledge


The Canadian phone business BlackBerry, which has been long been outperformed by rivals Apple and Samsung, has posted a smaller loss than expected, raising hopes that its chief executive can deliver on a pledge to return the company to steady profits.


The group's shares jumped after BlackBerry said it had spent less cash than many had expected and reported that its gross profit margin was up on a year earlier. BlackBerry also said its cheaper Z3 smartphone was selling well in Indonesia and that its services business, which manages its own and rival mobile devices on the internal networks of large organisations, had won back customers.


"The short trade is over in [Blackberry] for now ," said BGC analyst Colin Gillis, referring to investors who sell shares in the hope of profiting when the price falls. "They've got enough liquidity, and they've given us clear profitability targets."


BlackBerry has been slashing costs and has more than halved its workforce over the last two years as part of a do-or-die push to turn its business around after losing ground to its main rivals, Apple and Samsung.


BlackBerry's chief executive, John Chen, wants to stay in the smartphone buisness, but is now focused on BlackBerry's services business, which made up 54% of revenue in the last three months, up from 26% over the same period last year.


There are also early signs of recovery in BlackBerry's hard-hit hardware business. The Z3 was built under a partnership forged last year with the Hong Kong-listed unit of Taiwanese electronics company Foxconn, to help design, manufacture and sell devices.


As part of the deal, BlackBerry does not pay the full upfront costs for parts, but Foxconn takes a share of profits on each device in return for the risk of inventory management.


Excluding special items, the company drew down $255m in cash in the period, much less than the $784m it burned in the previous three months. Gross profit margins are also up, from 33.9% a year ago to 46.7%.


"All areas of our business are making very good progress," said Chen. "Financial objectives are on track, and strategy is on track, and the bottom line is we feel good about where we are."