BlackBerry investors eye progress signs
Analysts will look for software revenue growth, not long-term buzz, as company releases results
While infrastructure spending in the U.S. and an emerging technologies push in Canada may ultimately boost BlackBerry Ltd., investors will be looking for momentum in the here and now when the smartphone pioneer reports year-end and fourth-quarter results before markets open on Friday.
The Street, in particular, will want to know if CEO John Chen has made good on his pledge to increase revenue from software by 30 per cent year over year, a commitment he reiterated in December.
Analysts say that implies at least $180 million (U.S.) in software revenue in the fourth quarter ended Feb. 28, which would constitute a break out from the $150 million to $170 million range BlackBerry has delivered over the last five quarters.
RBC Capital Markets analyst Paul Treiber in a note to investors said the report will show further progress in the Waterloo, Ont., company’s pivot to software in the face of dwindling hardware sales, revenue and user access fees. Treiber expects it will show 65 per cent of total sales from software versus 54 per cent in the previous quarter.
Overall, the consensus view of analysts is for a break-even quarter in terms of adjusted earnings per share with a continuing decline in revenue to $291.4 million, although improving gross margins are also foreseen as BlackBerry drives more income from software.
BlackBerry, in its third quarter, reported an adjusted net loss better than estimates, helped by the software business, and raised its full-year growth forecast.
Chen told reporters in December that BlackBerry’s $100-million (Canadian) investment in an autonomous vehicle testing hub over the next few years will see more than 60 software engineers hired.
He said the company views the automotive and industrial operating system unit as a growth engine and hopes the hub can bolster its cybersecurity consulting.
Chen said the hub won’t produce revenue until 2018, but noted that clean energy and autonomous autos are priorities for the prime minister, and said the federal government has been a marquee client and supportive of BlackBerry’s turnaround efforts. He also said he expected it would take another four or five quarters to halt the steady decline in the company’s overall revenue.
“We believe BlackBerry faces challenges and must execute on further developing an enterprise sales channel to meaningfully accelerate software sales,” said Canaccord Genuity’s Michael Walkley.
“While we believe the senior management team is capable of executing against the market opportunity, we believe it could take several years for meaningful progress.”
According to Global Equities Research co-founder Trip Chowdhry, however, the company stands to benefit from U.S. President Donald Trump’s $1-trillion infrastructure spending commitment that is likely to include investment for expanded digital access.
“Chen has in the past successfully provided his expertise to Republican presidents and working with Trump’s administration will be no different,” Chowdhry wrote in a note to investors.
BlackBerry’s software business includes mobile device management products, along with the QNX industrial operating system, which is showcasing its autonomous vehicle, one of three being tested in Ontario as part of a pilot project.
QNX was reportedly part of a delegation to Queen’s Park that recommended that Ottawa be considered as a site for a provincial Centre of Excellence for Autonomous Vehicles.
The company could also participate in the federal government’s artificial intelligence research initiative.
The initiative features $125 million in funding announced in last week’s budget.
ABlackBerry spokesperson not immediately respond to a request for comment.