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Will BlackBerry’s PRIV Revive Handset Revenues?

Device volume expected to be lowOne of BlackBerry’s (BBRY) strategic initiatives is to achieve a profitable device business. John Chen, CEO of BlackBerry, stated that even though management is encouraged by the progress made in this segment, it expects device volume to be low as a result of the softness in the smartphone market.

As shown in the above chart, Canada’s (EWC) BlackBerry sold approximately 600,000 phones in fiscal 4Q16, lower than analysts’ estimate of 850,000 units and 14.3% lower than sales in fiscal 3Q16. This declining trend in smartphone sales needs to be addressed by BlackBerry as the CEO of the firm, John Chen, stated that the company needs to sell around 3 million handsets per quarter to reach the break-even point.

PRIV launched in November 2015

PRIV by BlackBerry is the first BlackBerry smartphone to be powered by Android (GOOG) (GOOGL). It provides users access to over 1 million Google Play apps along with BlackBerry’s security and productivity features. According to BlackBerry, PRIV features a 5.4-inch display and a 3410 mAh battery that lasts up to 22.5 hours. Unique to the PRIV is the DTEK app, which warns users when their privacy is at risk.

Chen attributed lower handset sales to a slowing smartphone market, where BlackBerry competes with Apple’s (AAPL) iPhone 6S and Samsung Electronics’ Galaxy S6 Edge. BlackBerry also stated that it is considering a less expensive Android-based smartphone, but it is likely to face competition from the recently launched iPhone SE.

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