Chen says plan remains on track despite BlackBerry revenue missing expectations

BlackBerry Ltd. made headlines last week after its latest quarterly revenues came in below analysts’ expectations, but the company and CEO John Chen appear undeterred by the news.

On the surface, BlackBerry’s numbers were positive: the company reported profits of $671 million (all figures USD) which ended May 31, with revenues of $244 million, including $169 million from software and services. Meanwhile, its operating income during the period was $14 million, and shareholders earned two cents per share.

However, as noted by both Forbes and the Canadian Press, those profits were goosed by a one-time payout of $815 million from chip maker Qualcomm; without it, BlackBerry’s profits would have been only $14 million.

The company’s sales revenue also missed analyst expectations by about $20 million, causing it to lose 11 per cent of its stock value in one day.

During the company’s June 23 earnings call, however, Chen said the company still expects its software and services business to grow “at or above our overall market,” in the range of between 10 and 15 per cent, and become fully profitable within the year.

“This is a third consecutive quarter of positive [earnings per share] and the fifth consecutive quarter of positive operating income,” he noted. “Our balance sheets continue to strengthen with the completion of our transition to a software business model… as well as the increase of cash from the positive outcome of the Qualcomm arbitration. This gives us increased capacity for driving shareholder value, both short term and long-term.”

In particular, Chen emphasized that BlackBerry “continue[s] to execute well and win important opportunities” in what he called the company’s four “growth engines”: enterprise software; embedded software (including the company’s connected car software); Internet of Things (IoT) appliances such as BlackBerry radar; and technology licensing (such as for new smartphone devices).

“Each of these above area represents large and expanding market,” he said.

In technology licensing, Chen mentioned a deal with U.K. smartphone manufacturer STK to integrate BlackBerry security software into future products – and, of course, TCL’s KeyOne, launched at the end of the quarter.

“Initial receptivity and demand… has been quite good,” Chen said of the KeyOne. “The device is so in many markets based on higher than expected customer demand.”

In its enterprise software division, Chen emphasized that BlackBerry company saw “solid” year-over-year – but not quarter-over-quarter – growth in billing revenue, a number that was not revealed in BlackBerry’s official press release, though Chen noted that the company processed more than 3000 customer orders of its Unified Endpoint Management (UEM) platform in the first quarter of 2017, and that the fourth quarter of 2016 – the period in which UEM hit the market – had been the highest-ever billing quarter in the company’s history.

He also mentioned BlackBerry Shield, a cybersecurity risk assessment tool that the company apparently released this quarter, but about which little information (aside from seven-year-old posts and a company release aimed at resellers) can be found online; and a few of BlackBerry’s newest key clients and partners, including Banque de France, France’s central bank and the 12th European central bank to use BlackBerry as a partner, and Canadian automotive supply giant Magna International.

In the embedded software sector, Chen emphasized “important design wins” in the automotive business, such as the recent release of BlackBerry’s Hypervisor 2.0 technology, which reduces the risk of vehicle software security breaches by creating virtual software containers; Qualcomm’s subsequent announcement that it would be adopting Hypervisor for its digital cockpit solution; and Nvidia’s announcement back in January that it would be using the company’s QNX operating system on its DrivePX2 platform.

In IoT, Chen announced that FedEx had chosen the company’s Radar platform for its “custom critical services,” and that BlackBerry would be launching a “cost optimized” version of Radar, called Radar Light, in the fall.

Our thanks to investment research platform Seeking Alpha for the transcriptions from BlackBerry’s June 23 earnings call.

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Eric Emin Wood
Eric Emin Wood
Former editor of turned consultant with public relations firm Porter Novelli. When not writing for the tech industry enjoys photography, movies, travelling, the Oxford comma, and will talk your ear off about animation if you give him an opening.

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