BlackBerry stock soars on success in auto sector

BlackBerry Ltd.’s bet on in-car technology paid off in its latest quarter as cash finally started to roll in from its deals with high-profile car manufacturers.

The Waterloo, Ont., company’s stock price soared more than 10 per cent during trading Friday after it reported revenue of $210 million and profit of $43 million for the three months ended Aug. 31, beating analysts’ expectations after a rocky start to its fiscal year. It closed up $1.35 at $14.62 on the Toronto Stock Exchange.

Revenue dipped to $88 million from $91 million a year prior for BlackBerry’s enterprise software and services, its largest business division since it put the brakes on smartphones to sell software that capitalizes on its reputation for security. The fall is a continuation from last quarter when BlackBerry changed to a subscription sales model to align with accounting rules that require it to report less revenue upfront.

But revenue from its car division, which includes connected car technology from QNX and its asset-tracking software BlackBerry Radar, grew 29 per cent to $49 million. This marks the third consecutive quarter of nearly 30 per cent growth in the division, chief executive John Chen said on a conference call with analysts.

“Finally, the deals we won two to three years ago are finally starting to pay us the royalties,” Chen said in a later interview.

Investors have been critical of how long it has taken for BlackBerry to earn revenue after announcing partnerships with tier-one auto manufacturers and companies such as Jaguar Land Rover and Ford Motor Co. Chen explained it’s a long-term game since BlackBerry must go through the design win, development, adoption and product shipment phases before it gets any royalties.

“Although it took a long time to get here, you should see it starting to become stable,” Chen said.

BlackBerry’s QNX software is now used in more than 120 million vehicles, according to company statistics. Its infotainment system continues to expand, but revenue from its advanced driver systems such as assisted braking grew at an even faster rate, Chen said. He’s still waiting for more revenue to kick in from Radar, used by the trucking industry to manage fleets.

This revenue is critical to replace revenue from handheld devices and service access fees, which are expected to drop to zero. BlackBerry still licenses its brand for use by smartphone manufacturers that also license its security software, but that revenue is counted under its licensing and intellectual property division. As for the enterprise software division, Chen said deferred revenue continues to grow under the new subscription model and ASC 606 accounting standard. BlackBerry’s stock price dropped 10 per cent when he announced the change last quarter, but Chen believes investors are more comfortable after seeing Friday’s results.