Why BlackBerry Stock Fell 7% Last Week

BlackBerry stock (TSX:BB) had a reasonable fourth quarter, but saw shares drop lower from a lawsuit filed against its CEO.

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There were some pretty good things that came out of BlackBerry (TSX:BB) earnings this week. But some really bad things as well. And not all of them related to the earnings report. While BlackBerry improved its losses (pretty good), the company also stated there is a sexual harassment lawsuit against the CEO (really bad).

So let’s get into what investors need to know about what’s going on over at BlackBerry.

What happened

First, let’s go over the numbers part of this equation. BlackBerry reported that it uncovered another US$55 million in cost savings during its most recent quarter. This allowed it to bring its losses down to US$56 million. And that’s a huge improvement from the US$495 million in losses reported a year before.

However, chief financial officer Steve Rai stated to the press that there are “still more opportunities to be more efficient.” These would include everything from developing legal entity structures to simplifying IT systems. The reason these savings haven’t been put in place yet is they are “bigger rocks,” Rai said. So there will be more time to get them to work.

These “bigger rocks” come after the company slashed its workforce by 200 during its third quarter. The lower loss was good news, but even better was the fact the revenue from its Internet of Things business hit a quarterly record of US$66 million. Its cybersecurity revenue also rose to US$92 million from US$88 million a year before. Even so, the company faced other issues.

Lawsuits underway

Financial results were one thing, but the company also faced a former BlackBerry employee filing a lawsuit the same day against then company and CEO John Giamatteo. The employee claims she was sexually harassed by the CEO, who then retaliated against her after she reported his behaviour.

BlackBerry has called the allegations “without merit and intends to vigorously defend against them.” Furthermore, the company stated it went through an “extensive investigation, which found no evidence of wrongdoing or violations of the company code of conduct.”

Even so, this left a black cloud over the company on earnings as it continues to battle with losses. And that’s something that could continue to weigh down the share price as the lawsuit goes forward. Especially if the CEO is forced to step down, leading to an unclear future for BlackBerry stock.

What to consider

I would certainly stay on the sidelines with BlackBerry stock while this lawsuit is underway. Meanwhile, it’s important to consider not just year-over-year growth for BlackBerry stock. Instead, let’s consider whether there has been any momentum over the last few quarters.

Total revenue for the company hit US$373 million in the first quarter, before shrinking significantly the rest of the year. This came from licensing and other revenue of US$235 million for the quarter, including a patent sale. The second quarter was more normal, at US$132 million in revenue and US$175 million by the third quarter. For the fourth quarter, it hit US$173 million, so a bit of a slowdown, leading to the drop in share price. However, the company does believe it can achieve profitability in full-year 2025.

What investors will have to consider is whether it can stay out of the negative spotlight while that happens. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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