BlackBerry (TSX:BB) made headlines in all the wrong ways this week. Chief Executive Officer (CEO) John Giamatteo moved to dismiss the sexual harassment lawsuit against him after having had parts of it dismissed in July. The lawsuit seeks damages from Giamatteo himself; it is not a direct financial risk to BB. However, the case is generating publicity, and a reputation for a toxic work environment could shake investor faith in what is already a struggling company.
Blackberry’s long decline
BB stock has been in a freefall for a long time. The stock first began experiencing weakness when it became apparent that Apple’s iPhone had beaten the BlackBerry in the smartphone race. The selling continued for a long time after that, with the stock ultimately falling over 90% in price. The stock got a brief injection of life when it was bid up by Reddit investors during 2021’s meme stock craze, but it quickly gave up the gains. Today, BB stock is down 98.66% from its all-time high, which was set in 2007.
The question is, what’s going on with BB stock today? BlackBerry’s selloff is still ongoing, with the stock down 29% year to date, despite this having been a very strong year for North American tech companies. The lawsuit may be one factor influencing the volatility. There are other concerns as well.
Most recent earnings
BlackBerry’s most recent earnings release was fairly disappointing, meeting but not exceeding analyst estimates with the following metrics:
- $144 million in revenue, down 61.3%
- $96 million in gross profit, down 46.3%
- A $39 million operating loss, worsened by $28 million
- A $42 million net loss, worsened by $31 million
- -$15 million in cash from operations, down from $99 million
These results were pretty disappointing. The fact that the numbers got worse from the year-ago period is evident just from looking at the bullet points above. Additionally, while BB did not “miss” on earnings in the first quarter (Q1), its earnings per share numbers came in just in line with estimates, which was no cause for celebration.
Operational trouble
There may be problems with BlackBerry’s operations in addition to the known problems with its financials. The company’s best-known product is QNX, an operating system that can be installed in cars and other “smart” devices. BlackBerry frequently touted its success with QNX, putting out press releases that showed how many cars QNX was installed in. The most recent count was 215 million. That sounds impressive, but the company recently stopped putting out those press releases, indicating that maybe QNX is not as popular as it once was.
A related issue with BlackBerry’s Q1 was its loss of licensing revenue. BlackBerry has historically made significant sums of money off its mobile device patents, but that almost dried up last quarter. That may have been due to the 2023 sale of BlackBerry’s patent rights to an investment firm.
CEO’s sexual harassment lawsuit
As mentioned previously, BlackBerry is facing a major issue in the form of a sexual harassment lawsuit against its CEO, John Giamatteo. The lawsuit alleges that Giamatteo assaulted the company’s vice president of marketing and then retaliated against her for bringing up the issue. The lawsuit may be part of why BB stock is not doing well this year. Although BB itself is not being sued, the suit may indicate issues with a hostile work environment. A reputation for a hostile work environment would not be a positive for BlackBerry or its shareholders.
Foolish bottom line
Taking all factors into account, I think those currently selling BB stock are right to be concerned. The company is losing money, has lost all its licensing revenue, and has a CEO who’s being sued for sexual harassment. It just isn’t an appealing overall package.
