BlackBerry pinning fortunes on software
Losses expected to widen, but shift away from hardware offers reason for optimism
All eyes will be on software when BlackBerry Ltd. unveils its secondquarter earnings before the bell on Friday. CEO John Chen has vowed to sharply increase revenue from mobile-device management software and from secure enterprise server licensing fees to make up for plunging contributions from handset sales. Analysts say acquisitions may have put his target within reach.
The average estimate is for BlackBerry to post an adjusted loss of nine cents (U.S.) per share in the quarter ended in August, or about $46 million. That compares to a two-cents-per-share loss a year ago. Revenue is seen falling 33 per cent year over year to $611 million amid optimism that the decline may have hit bottom.
The Waterloo, Ont.-based company’s fortunes have plunged amid competitive onslaughts in hardware from Apple and Samsung, and overall revenue has been tumbling for more than two years.
Five things to watch on Friday:
The question of cash While BlackBerry is seen posting a money-losing quarter, it is still ex- pected to report more than $1.766 billion in net cash after debt, bolstered by one-time items and disciplined spending control. Chen has reiterated his expectation that BlackBerry will remain free cashflow positive through fiscal 2016.
How’s it growing? BlackBerry has said it expects its acquisition of secure mobile platform company Good Technology to add $160 million to fiscal 2016 software sales, despite a short-term drag on earnings reflecting the $425-million purchase price. Analysts say the addition, as well as new revenue from other acquisitions, will bring the company to within $50 million of its fiscal 2016 software sales goal of $600 million.
Smartphone sales The consensus forecast is for 1.3 million unit-sales recognized in the quarter versus 2.1million in the same period a year ago.
Sales of new phones, including the Passport and BlackBerry Classic, have failed to gain traction, and analysts will look for some sign of stability in the business, which still accounts for more than 40 per cent of revenue.
Chen has outsourced some manufacturing and continues to pare jobs as he seeks to break even on hardware, which he calls a necessary platform for building software sales.
A “Venice” slider phone? Chen has been guarded about reports that BlackBerry is building a phone using Google’s Android opensource operating system, which could be fortified with BlackBerry security features.
Some analysts say an Androidbased device would broaden Blackberry’s hardware reach, while others suggest it would undermine the company’s’ reputation for secure mobile solutions.
The new kids Chen has said organic growth is not sufficient to meet the company’s software revenue target and has acquired smaller companies with a focus on boosting mobile security.
The Good Technology deal is not expected to close until the third quarter, but Chen could highlight revenue brought in by other acquired enterprises, such as Secusmart and WatchDox, and from longterm division QNX.