BlackBerry Revenue Results Quarterly Top Expectations of Software Rally Shares

BlackBerry Revenue Results Quarterly Top Expectations of Software Rally Shares

The BlackBerry’s pivot (BB Pivot) to software began to show traction on Friday, after the company reported a smaller quarterly loss and its first quarter-to-quarter revenue increase in over two years, sending its stock soaring 13 percent.

Significantly, gains in software revenue more than offset a steepening decline in legacy system access fees for the first time, and the Waterloo, Ontario-based company said this trend should continue.
The company may break even in the current quarter, but this could be complicated by investments being made toward growing both software and hardware sales, said Chief Executive John Chen, who sees a return to sustainable profitability in fiscal 2017, which begins March 1.

BlackBerry has staked its turnaround on software and more aggressively licensing its trove of patents after its once-dominant handsets conceded the consumer smartphone market.
“BlackBerry hit a software number that investors have been looking for them to hit for quite some time,” said Morningstar analyst Brian Colello. “I think the investment in security, in software, is the right move.”

The better-than-expected results were driven by a sharp jump in software and patent licensing revenues and a higher average selling price for phones, driven by the Priv, its new Android-powered device.
“We’re planning on other Android phones, but it all hinges on how we do with the Priv,” said Chen at a media roundtable, adding the Priv will be hitting over 30 countries this quarter.

Chen, who sees the hardware business possibly turning the corner this quarter, said BlackBerry is open to licensing some of its proprietary software features.
“I’ve said that if we cannot make money we’re going to get out of the phone business, and I mean hardware. We have tons of software that absolutely could run, not only on Android phones, but Apple and Windows phones too,” said Chen.
“We will remain in the phone business one way or the other,” said Chen, stressing that ideally he would like to keep making devices and licensing at the same time.

QUARTERLY RESULTS

In the quarter ended Nov. 28, BlackBerry reported a loss of US$89 million, or 17 cents a share. That compared with a year ago loss of US$148 million, or 28 cents a share.
Excluding restructuring charges and other one-time items, the company posted a loss of US$15 million, or 3 cents a share.
Quarterly revenue fell 31 percent to US$548 million from a year earlier, but rose 12 percent from the prior quarter, after nine consecutive quarters of declines.
Analysts, on average, expected BlackBerry to post a loss of 14 cents a share on revenue of US$489 million.
Software revenue more than doubled in the quarter, putting BlackBerry within striking range of its US$500 million target for the fiscal year ending Feb. 29, 2016.
Device sales also rose for the first time in four quarters to US$214 million from US$201 million in the second quarter on the back of the Priv.
BlackBerry sold 700,000 devices, down from about 800,000 in the prior period, but average selling prices jumped to US$315 from US$240.

BlackBerry reported a smaller-than-expected fiscal third-quarter loss on Friday and its first quarter-to-quarter revenue gain in over two years, indicating turnaround efforts may be gaining traction.
The better-than-expected results, driven by higher hardware and software revenues, sent BlackBerry shares up 5 percent in early trading in New York and Toronto.

“I’m pleased with our progress and the growth in Q3,”

said Chief Executive Officer John Chen, on a conference call. “Our results demonstrate that we’re executing on the turnaround.”
In the quarter ended Nov. 28, the Waterloo, Ontario-based company reported a loss of $89 million, or 17 cents a share. That compared with a year ago loss of $148 million, or 28 cents a share.
Excluding a noncash credit tied to a change in the value of debentures, restructuring charges and other one-time items, the company posted a loss of $15 million, or 3 cents a share.

Quarterly revenue fell 31 percent to $548 million from a year earlier, but rose 12 percent from the prior quarter, after nine consecutive quarters of declines.
Analysts, on average, expected BlackBerry to post a loss of 14 cents a share on revenue of $489 million.
Software revenue, a metric being closely watched by analysts as BlackBerry pivots to focus on that segment, more than doubled to $162 million from a year earlier.

“BlackBerry hit a software number that investors have been looking for them to hit for quite some time,” said Morningstar analyst Brian Colello.
Year-to-date software revenue is about $362 million, within striking range of the company’s forecast target of $500 million for the current fiscal year ending Feb. 29, 2016.
Revenue from smartphone sales also rose for the first time in four quarters to $214 million from $201 million in the second quarter.

It sold 700,000 devices in the latest quarter down from about 800,000 in the prior period, but average selling prices (ASPs) on devices jumped to $315 from $240.
The ASP increase came after BlackBerry recently rolled out the Priv, its first device powered by Alphabet Inc’s Google Android operating system. BlackBerry said it sees its hardware arm possibly returning to breakeven operating profit in the current quarter.
Significantly, gains in software revenue more than offset a decline in BlackBerry’s legacy system access fees this quarter. BlackBerry said it expects the trend to continue, helping it beat both top-line and bottom-line Wall Street expectations in the ongoing quarter.
BlackBerry stock was up 63 cents to $8.43 in New York and 96 Canadian cents to C$11.85 in Toronto.

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