BlackBerry shares spike as record software sales boost profit and outlook
BlackBerry Ltd.’s stock spiked more than 12 per cent as soon as markets opened Thursday after it reported record revenue in its software business.
The Waterloo, Ont.-based smartphone-turned-software company beat analysts’ expectations that it would break even, posting a profit of $26 million or 5 cents per share excluding some items for the three months ending Aug. 31.
Revenue for software and services hit US $196 million on the strength of growth in its enterprise software and important deals in its automotive business, including a partnership with Delphi Automotive to build a software operating system for self-driving cars.
The stock was trading up 12.58 per cent on the Toronto Stock Exchange at $12.98 by 3:14 p.m.
The success comes a year after BlackBerry gave up on the handset business that catapulted the small town company to one of the world’s most recognizable brands. Instead, it turned to other lines of business where it could bank on its reputation for high security.
Now, CEO John Chen said his company is winning again. In a call with analysts, he pointed to contracts with the U.S. government — BlackBerry had 23 transactions over US $100,000, seven larger $500,000 and five over $1 million with federal agencies in the last quarter — and a few awards and accolades for its security acumen as signs of success in the enterprise software realm, its biggest cash driver.
BlackBerry also announced its first “BlackBerry Secure” licensing deal with NTD, a Yangzhou and Beijing based designer manufacturer of smartphones and Internet of Things devices. It will embed BlackBerry’s security software into its devices for a fee, a business model that Chen expects to drive growth for the second half of the year. He sees opportunities in securing not only smartphones, but laptops, IoT devices and censors, to start.
“I don’t see a limit to my ability to license software technology,” Chen said in a call with media.
The company also has an appetite for mergers and acquisitions, Chen said. While he didn’t reveal specific plans for the US $1.9-billion stockpile of cash, much of it an award from a dispute with Qualcomm, he said the company is looking at buying players in cyber security, automotive and enterprise management.
“We’re going to make acquisitions. We’re very patient. We don’t want to be over paying,” he told media.
When it comes to automotive technology, Chen doesn’t expect self-driving cars to hit the roads as early as others in the industry.
“Everyone says 2021, I don’t believe it,” but he is setting up the company to compete in that world.
“We have to win that for the future, but today there’s a lot of opportunity on the connected ones,” Chen said.
To that end, he noted there are about 60 million cars built annually that include some sort of intelligent software, such as the technology provided by the QNX division.
BlackBerry also upgraded its outlook for the year, stating it expects software revenue to grow by 10 to 15 per cent this fiscal year, which ends in February.
Revenue fell to US $249 million from US $352 million a year earlier but rose slightly from US $244 million in the prior quarter. Net income for the quarter was US $19 million, or 4 cents per share.
Excluding restructuring costs and other items, BlackBerry said it expected fiscal-year revenue of US $920 million to US $950 million and positive earnings per share. It also forecast positive free cash flow.