In a previous article about BlackBerry (BBRY) called BlackBerry: Why Z10 Margins Are Higher Than You Think, we calculated the ASP and gross margins for the Z10 based on BlackBerry's Q4 FY13 financials. We are now going to use those figures to calculate the unit sales needed for breakeven for Q1 FY14, as well as a sensitivity analysis to show how EPS would change based on changes to unit sales or service revenues.
Non-Hardware Revenues and Gross Margins
To start, we are going to look at the gross margins delivered by BlackBerry's non-hardware segments. The software and other segments are left at Q4 FY13 revenue levels, while we are using a 5% decline from the $947 million in revenue that service segment generated last quarter. This would be in line with BlackBerry's guidance for a single digit decrease in service revenues for Q1 FY14. Gross margin percentages are taken from BlackBerry's financials for service and software, while the other segment is estimated to give a 25% gross margin. Based on these calculations, BlackBerry's non-hardware segments are expected to produce a combined gross margin of $836.14 million.
| Segment | Q1 FY 14 Revenue ($ Million) | Gross Margin (%) | Gross Margin ($ Million) |
| Service | $900 | 86.1% | $774.90 |
| Software | $63 | 86.1% | $54.24 |
| Other | $28 | 25.0% | $7.00 |
| Total | $991 | 84.4% | $836.14 |
We are also going to assume that amortization (the portion that hits operating expenses) and R&D expenses remain at Q4 FY13 levels. SG&A is expected to increase from $523 million to $784.5 million. This 50% increase is based on BlackBerry's comments during the Q4 FY13 earnings call about increased marketing spend. While the increased marketing spend will not all roll up into SG&A in the actual Q1 FY14 earnings report, BlackBerry's guidance was that we could use an increase of 50% in SG&A to model the effect of the increased marketing spend. Total operating expenses for Q1 FY14 are estimated at $1.348 billion.
Source http://seekingalpha.com/article/1343651-blackberry-3-million-bb10-units-for-breakeven-in-q1-fy14?source=google_news
| Segment | Q1 FY14 Operating Expenses ($ Million) |
| R&D | $383 |
| SG&A | $784.50 |
| Amortization | $181 |
| Total | $1,348.50 |
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