Though his company announced a first-quarter loss of more than $600 million USD today, BlackBerry Ltd. CEO John Chen remains optimistic about its long-term viability thanks to the continued growth of its software services division and the licensing model it’s now taking with its hardware business.
In a release, the company officially reported an operating loss of $669 million USD for the first quarter ending on May 31, 2017, though its software and services division pulled in $424 million USD.
“We’re at a point where our business is extremely efficient, and we’re no longer really making any hardware,” Chen told reporters during a conference call regarding BlackBerry’s Q1 financial report on June 23.
Referring to the company as a “hardware design house” which had recently entered “new and favourable” agreements with manufacturing partners, he said, “I do believe the Q3 time frame will either break even or have a slight profit.”
While Chen admitted during the call that BlackBerry’s device revenue came in below expectations, led by disappointing sales for the Android-powered Priv, and that during the quarter the company “recognized” revenue from over 500,000 devices with an average sale price of $290 each, it did not disclose hardware sales figures or revenues in its release.
For the BlackBerry faithful who don’t want to let their devices go, he was short on details about the company’s upcoming handsets but heavily implied they were being developed, and highlighted the company’s ability to release its version of Android Marshmallow – and subsequent updates – on schedule.
“We are the only vendor that has kept pace with Google in delivering timely Android security patches at the start of every month,” Chen said. “Our releases have been ahead of Samsung, HTC, LG, Sony, and other Android-based players, which means that BlackBerry Android users enjoy the highest level of protection from cybersecurity threats among four Android devices.”
When asked about the Priv, Chen called it “a great engineering product” which has served its users well (as we can attest), but is too expensive for the majority of enterprise users, who have been requesting a similar device with midrange specs.
“They like everything BlackBerry represents in terms of security and the ability to run all software with the Android operating systems,” he said. “This is why I’ve said that we should really… produce a midrange product with our level of security and software.”
At one point during the call, Chen was asked point-blank why the company wasn’t exiting the hardware business entirely. He replied with two reasons: “Many customers, especially in the government world, still rely on us to provide a secure handset for them,” and “number two, I really, really believe that we can make money out of our device business.”
That said, he admitted that if BlackBerry were discontinue its hardware efforts tomorrow, the impact on its overall operations would be minimal – which is why the company created a software division in the first place.
On the services end, Chen was especially pleased to reveal that during the quarter BlackBerry added 3,300 enterprises to its customer base, which includes the Canadian government, U.S. Senate, Pentagon force protection agency, California Department of Justice, and the U.S. Coast Guard, and that its Enterprise Mobile Management suite grew from 90 subscribers during its first 60 days of release last year to 526.
In fact, when combined with IT licensing, BlackBerry’s software and services revenue was $166 million during the quarter, the highest in the company’s history and a year-over-year increase of 21 per cent, Chen said.
Excluding IT licensing, software and services grew by 131 per cent year over year, making this the second consecutive quarter that the company more than doubled its software and services revenue, he added.
“We’re obviously very pleased with the momentum,” he said. “We have a plan and a roadmap to drive profitable revenue growth later in the year.”