BlackBerry software business hits snag

SHARES SLIDE 12%

BlackBerry to rocket straight up after it completed its transformation to software from its once iconic handsets, which it abandoned making in-house last year.

Plus, BlackBerry’s four main business lines — enterprise software and services, embedded software such as QNX in-car systems, Internet of Things devices such as Radar truck tracking, and licensing of its brand and software for devices including smartphones — are increasingly competitive. It’s up against major players including International Business Machines Corp. in the enterprise game and just lost Toyota Motor Corp. as a customer to an open source platform called Automotive Grade Linux.

Still, Chen reiterated guidance that BlackBerry’s software business will grow at or above market rates of 10 to 15 per cent, pointing to major deals with France’s central bank and Fedex in a conference call with investors. Yet he left analysts questioning how long they’ll have to wait to see growth in BlackBerry’s new business lines.

“Which piece of the business gets us to that double digit growth for year?” BMO Capital Markets analyst Tim Long asked on the call, pointing to lower growth in the enterprise market. “Is that business just maturing and tough to find growth?”

Chen insisted that’s not the case. The problem isn’t its product, he said, rather, the need to ramp up its distribution channels and get more aggressive at marketing. “We just don’t have enough people working on more deals. It’s as simple as that,” he said.

For the first time, BlackBerry broke down how much revenue it earns for its software endeavours. Enterprise software brought in the lion’s share at US$92 million, up from US$82 million last year. Next, its technology solutions (including Radar) earned US$36 million up from US$35 million. Finally, its licensing deals — such as the percentage it gets when manufacturers sell BlackBerry-branded handsets — brought in US$32 million up from US$25 million.

Revenue from handsets and service access fees, however, continued their steep decline. Both are expected to fall to zero — handsets in the next quarter or two, while service access fees will decline at an expected rate of 25 per cent per quarter until they disappear.

But Chen remained positive. He expects stronger growth in the second half of its fiscal year and plans to use some of the Qualcomm windfall to acquire companies that will expand its reach.