BlackBerry’s banner year hits snag as revenue dips
WATERLOO — BlackBerry chief executive John Chen defended his plan to increase the software side of the business, as its shares tumbled Friday.
The company said first-quarter revenue came in at $235 million, down from $400 million a year ago.
On the Toronto Stock Exchange, BlackBerry shares slumped 12.28 per cent or $1.80 to close at $12.86. That setback came after its stock had gained momentum in recent weeks, hitting a four-year high earlier this month.
In a meeting with members of the press, Chen said he believes analysts expected last quarter’s one-time $27 million in professional services revenue would reoccur.
Still, BlackBerry outperformed on a number of other benchmarks, including net income, where it reported a profit of $671 million, a turnaround from the $670-million loss in the same quarter a year ago.
The lower-than-projected sales struck a negative note in what has otherwise been a banner year for the Waterloo-based company. Shares have surged more than 60 per cent as investors started treating BlackBerry like the growing software company it has turned itself into.
The latest quarter was boosted by a onetime payment it received as a rebate on licensing fees from chipmaker Qualcomm — one of its suppliers — after an arbitrator ruled in BlackBerry’s favour in a dispute over the fees.
Chen said he expects revenue from licensing and some software services to increase in the latter half of the company’s financial year.
“It’s going to be more of a second-half growth, I think,” Chen said.
BlackBerry plans to release the entry-level version of Radar called Radar Light, a fleet tracking technology, in the fall. It will be developed for smaller companies. It hopes to move from sales of eight million to 28 million units. Among those using Radar is FedEx.
The $814-million payment from Qualcomm boosted BlackBerry’s cash balance to $2.6 billion, which Chen said he intends to use to finance acquisitions to expand BlackBerry’s market reach.
“The problem we have is we don’t have any distribution scale,” he said, referring particularly to Radar.
BlackBerry also plans to buy back up to 31 million of its common shares.
There has been speculation of late that BlackBerry could be a takeover target. Citron Research published a report saying BlackBerry is a likely buyout target at a sizable premium, now that its transition from hardware maker to software company is nearly complete.
Chen, who headed software services firm Sybase before it was acquired by German multinational SAP, said such a scenario is an unlikely outcome for BlackBerry in the near future.
“I’m here really to fix it, to build it,” he said, though he added he wouldn’t rule out a takeover entirely.
With these quarterly results, BlackBerry also reorganized how it reported revenue to reflect its current reality as a software company with a side business in licensing old hardware patents.
The new software and services segment accounted for $92 million in revenue, up 12 per cent from what would have been $82 million in the same quarter last year.
Chen has said he wants to increase that software number faster than 13 per cent a year, as he fights with competitors like IBM and MobileIron for the growing market in software that helps companies and governments keep their employees’ devices safe from hackers.
Licensing revenue was $32 million, compared with $25 million last year.
Hand-held device revenue, which is made up of licensing agreements for the company’s phone brand to company’s like China’s TCL Corp., was $37 million, compared to $152 million last year when the company still produced its own phones.