From smartphones to software - is BlackBerry back?

2017-09-28 21:39 - Gerrit De Vynck, Bloomberg
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BlackBerry

(Picture: AFP)

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Toronto - BlackBerry shares soared on Thursday after record software revenue helped earnings beat analysts’ estimates, reassuring investors that the former smartphone maker is succeeding in a pivot away from hardware and will hit growth targets this fiscal year.

The second-quarter results suggest a disappointing performance in the first quarter that sent the stock plummeting was an exception rather than the rule in CEO John Chen’s attempts to build a growing, profitable software company.

BlackBerry shares gained as much as 9.8% in early trading in New York.

From phones to software 

Chen has spent the last several years winding down the company’s phone business and replacing it with software through acquisitions. Now, investors want to see organic growth. BlackBerry had 3 300 enterprise customer orders in the quarter, up about 10% from the previous period. Gross margins jumped sequentially too, to 76% from 67%.

All that puts BlackBerry on track to hit Chen’s estimate of 10% to 15% software revenue growth by March, a goal the company reaffirmed on Thursday. The company scored another win last week when it signed a deal with auto-parts supplier Delphi Automotive to provide the operating system for self-driving car technology Delphi will be offering in 2019.

BlackBerry also said on Thursday it has signed its first deal to license its special version of the Android smartphone operating system. Finding ways to make money off of BlackBerry’s smartphone expertise is another key plank in Chen’s strategy.

Total sales, excluding some items, were $249m in the fiscal second quarter, the company said, beating the average analyst forecast of $220.8m. Software and services revenue rose 26%.

The positive results will shore up BlackBerry’s position that it will soon be able to produce profits on a quarterly basis, something analysts had expressed scepticism about. In the second quarter, BlackBerry reported earnings of 5 cents a share, compared with the average analyst projection that the company would break even.

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