BlackBerry Ltd helped by its higher-margin software business, reported better-than-expected adjusted earnings and raised its full-year growth forecast on Tuesday, though concerns about overall revenue growth reversed early share gains.Read more ↓
BlackBerry Chief Executive John Chen said at a midday event with reporters that he expected it would take another four or five quarters to halt the steady decline in the company’s overall revenue.
“I don’t consider ourselves in a turnaround anymore,” Chen told reporters at the company’s Waterloo, Ontario headquarters. “Now we need to execute for growth.”
BlackBerry has gone through a wrenching transition in recent years as it tries to build a software business not tied directly to its smartphones, which have lost ground in the iPhone and Android era and are now being made and sold by others.
While still a year from overall revenue growth, investors cheered Blackberry’s improved outlook and the growing role of the software business – which includes mobile device management products, the QNX industrial operating system, and a range of recent acquisitions.
“The part of the business that represents the future continues to show, I think, reasonably good progress,” said IDC analyst John Jackson.
Chen said software sales should grow at least 15 percent in the fiscal year beginning in March, after sticking to a 30 percent growth target for the current fiscal year.
BlackBerry said much of its software and services revenue was recurring in nature, requiring less spending and helping the company earn a record gross margin.
“That means as more revenue comes in, a higher percentage drops straight to the bottom line,” said Morningstar analyst Ali Mogharabi.
Software and services revenue rose to $160 million from $155 million a year earlier, while hardware sales dropped to $62 million from $220 million.
Chen said BlackBerry’s new Radar fleet tracking service won a second customer, Titanium Transportation Group Inc (TTR.V).
BlackBerry is also investing C$100 million ($75 million) in a new autonomous vehicle testing hub in Ottawa it hopes will bring in revenue in 2018, and building up a cyber security consulting practice.
Excluding special items, quarterly earnings of 2 cents a share beat analysts’ expectations of a 1-cent loss, according to Thomson Reuters I/B/E/S. On that basis, BlackBerry forecast a profit for the year ending in February, up from a prior outlook of breakeven to a 5-cent loss.
Revenue fell to $289 million from $548 million, missing the average of analyst estimates, while net losses widened to $117 million from $89 million. That included a writedown related to the sale of two data centers.
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