BlackBerry Shares Increase as Software Sales Hit Record

0
84

On Thursday, BlackBerry Ltd of Canada reported a stronger-than-expected quarterly profit as sales of high-margin software hit a record, increasing investor confidence in its turnaround and boosting shares by 14 percent.

Revenue on software and services rose 26 percent to $196 million (145.79 million pounds) during the second quarter that ended Aug. 31 from a year earlier, more than the average forecast of $175 million of two analysts.

The results supported hopes that Chief Executive John Chen was succeeding in rebuilding BlackBerry, whose revenue has weakened for seven years as its smartphone business collapsed. Chen has stopped handset manufacturing and focused on selling software to governments, corporations, and industrial companies.

“Obviously a very good quarter for the software business, which is a good sign for BlackBerry,” stated an analyst at CCS Insight, Nicholas McQuire.

The company recorded a quarterly profit of 5 cents per share, excluding special items, as compared to a break-even forecast by analysts.

Quarterly revenue of software and services was buoyed by a sharp rise in licensing fees, to $56 million from $16 million in 2016.

“Licensing will eventually contribute about as much revenue as BlackBerry’s larger enterprise software business,” said Chen in a call with reporters.

Chen informed BNN television that the company hoped to close another deal on autonomous-vehicle software directly with an unnamed carmaker later in 2017, which would follow a deal signed with Ford Motor Co last October that has begun to produce revenue for BlackBerry.

“There’s some exciting growth opportunities,” Ali Mogharabi, a Morningstar analyst said, noting progress in getting BlackBerry technology into self-driving cars.

The company announced on September 20 that it would work with auto supplier Delphi Automotive Plc on a software operating system that will be used in self-driving cars, sending its shares up by 9 percent that day.

BlackBerry could receive licensing fees of $5 to $25 per car with advanced self-driving technology, up from the $1.50 to $5 that it earns for just providing infotainment systems, Chen revealed on an analyst call.

However, some investors stated that it was too early to consider the turnaround a success.

“The company is at the intersection of some interesting trends … but it’s still early days for them,” stated a portfolio manager at Parnassus Investments, Lori Keith, which does not own BlackBerry shares.

Waterloo, Ontario-based BlackBerry stated that it expected adjusted full-year revenue of around $920 million to $950 million. On average, analysts had forecast $924.4 million. The company also forecasts hitting its software sales growth target of 10 to 15 percent.

Revenue from licensing of its software and brand name include royalties on BlackBerry-branded devices that are sold by Indonesia’s BB Merah Putih and China’s TCL Communication Technology Holdings Ltd.

On Thursday, BlackBerry also announced that it signed a new deal for a Chinese manufacturer to sell BlackBerry Secure-branded devices starting early 2018.

The company reported quarterly net income of $19 million, or 4 cents per share, as compared to a loss of $372 million, or 71 cents per share, in 2016. Total revenue, excluding items, declined 29 percent to $249 million.

Canadian-listed shares of BlackBerry were up by 12.5 percent at C$12.98 after increasing to as high as $13.47. Its U.S.-listed stock increased by 13.2 percent to $10.45, the highest since June.