BlackBerry transition to software paying off
WATERLOO, ONT. • BlackBerry Ltd.’ s heyday as a smartphone industry titan may be over, but its efforts to transform into a multipronged software company finally seem to be paying off.
The Waterloo, Ont. company’s stock price spiked more than 11 per cent Friday after it said it expects to make an adjusted profit this year and released quarterly results that, although still in the red, beat Bay Street’s expectations.
Signs of success in the new software ventures prompted investors to rally behind the stock that collapsed alongside smartphone sales as customers flocked to Apple and Android devices. But CEO John Chen believes BlackBerry turned a corner a while back when it changed its focus to software from hardware, he told reporters at a media roundtable.
BlackBerry is “entering into a different phase altogether” as it focuses on automotive technology, enterprise software and software licensing after axing internal smartphone development in September, Chen said.
He’s happy with the products BlackBerry now offers, he said, but his top priority is actually selling it. BlackBerry previously only sold to telecoms, but now needs more salespeople to sell a variety of products to governments and businesses worldwide. Approximately 1,000 of the 4,000- person workforce is now in sales, he said.
Still, BlackBerry hit its an- nual growth target of 30 per cent in its software and services business, inked more than 3,500 customer orders in the last quarter and expects to grow at a faster pace in fiscal 2018 than the predicted market growth rate of 10 to 12.5 per cent, Chen said in a call with analysts.
“We think we can do better than that,” Chen said. He expects it will grow between 13 to 15 per cent, pointing to its QNX automotive software division and its fleet management software as particular growth drivers. BlackBerry also anticipates more revenue from enterprise and government clients and royalties from licensing its mobile software.
“Not everything will work as you all know, but I think we’ve got enough irons in the fire that the combination of that makes us feel comfortable with our numbers,” he said.
Chen said he’d be foolish to describe one good quarter as a breakthrough, but he believes the company will have more good quarters in the future than in the past few years.
“It’s not going to be a straight line up,” he said.
After an acquisition hiatus, Chen told reporters he is once again open to buying companies in the automotive and distribution, he plans to hire more employees, particularly in sales, and he’s aiming to get BlackBerry software into devices such as tablets, wearables, medical devices and appliance.
“We’d like to have our secure technology embedded into everything,” he said. “The tablet is the closest proposal on the table.”
He cited Disney as an example of the strategy to slap the brand on everything that contains its content without manufacturing a single item.
Meantime, BlackBerry’s manufacturing partners recently launched two smartphones that will bring royalty revenue. While BlackBerry will not reveal how much it earns per device, Chen said he believes multi- million units will sell annually.
“I will personally be disappointed with a million units,” he said.
Chen said he was very bullish when it comes to automotive software. BlackBerry’s infotainment systems — these sell for about $ 3 to $ 5 per car — are already in 60 million cars, but he hopes to sell this alongside four or five other in-vehicle applications currently in development.
“Rather than getting a set amount of dollars per car when you roll it out the manufacturing l i ne… we want a service component of that on a monthly basis,” he said.
BlackBerry also reported lower costs this quarter as it shifted resources to software and scaled back certain jobs. ( Its overall workforce was stable though it hired 1,000 people last year, Chen said.) Ford recently hired 400 of its engineers.
“We no longer designed hardware, antennas, keyboards… we no longer need engineers in the factories helping building devices,” Chen said.
It reported a loss of US$47 million or 9 cents per share in the three months ending Feb. 28, shrinking its loss of $238 million or 45 cents per share in the same period last year. On an adjusted basis, it earned 4 cents per share, beating analysts’ predictions that it would break even.