Sun, Apr 02, 2017 - Page 16 News List

BlackBerry posts profit after outsourcing handsets

Bloomberg

BlackBerry Ltd is finally starting to look like a real software company.

After three years of acquisitions, layoffs and trying to convince customers it could do more than build smartphones, the Canadian company’s software revenue and profit margins are growing in the way the firm’s chief executive officer John Chen (程守宗) wants them to. The stock too: It rose its most in 15 months.

BlackBerry surpassed its target of US$640 million in software revenue for fiscal 2017, achieving Chen’s goal of increasing sales from that division by 30 percent in the year.

It posted profit of US$0.04 per share, surpassing the highest estimate from analysts, and said it would be profitable for its entire fiscal 2018, which began this month.

Gross margins were about 60 percent, the company said in a statement on Friday.

BlackBerry expects to achieve margins of 70 percent for fiscal 2018, chief financial officer Steve Capelli said during a telephone call with analysts.

The stock surged as much as 16 percent to US$8.08 in New York, its biggest intraday gain since December 2015.

BlackBerry shed the burden of its shrinking smartphone business by officially outsourcing all device design, production and sales to other companies last year. It has also been developing software for self-driving automobiles and has a formal partnership with Ford Motor Co involving in-car connectivity. Earlier this week, Ford agreed to hire 400 of BlackBerry’s mobile tech experts to work on connected cars.

Now the challenge is selling its suite of security-focused software products, which range from tools that help companies track their employees’ mobile devices to computer operating systems for guided missiles. The sales organization Chen inherited three years ago was completely geared toward selling smartphones to wireless carriers.

“That was it. I really didn’t have a salesforce,” Chen said.

Now it is much more diverse and counts more than 1,000 of the company’s 4,000 employees.

BlackBerry sees 13 percent to 15 percent growth this fiscal year in software and services, at the upper end of the market rate, he said.

That expansion would come from “a combination of some current and existing products which we’re proud of and some new stuff coming online,” he said. “Not everything will work, but I think we’ll get enough iron in the fire, and the combination makes us feel comfortable we will grow at these numbers.”

BlackBerry is to start licensing its technology and brand to more companies, Chen said, for example, BlackBerry-branded medical devices and tablets could show up soon.

The firm is also getting back into the acquisition game, Chen said.

Buying security software tools such as file-sharing or emergency notifications was how Chen ramped up revenue growth in the first place. Now, he is looking at the automotive and cybersecurity spaces, he said.

The company has US$1.7 billion in cash, and does not plan to use any of it for buybacks or dividends, Chen said, adding that it also hired about 1,000 people last year even while reducing expenses.

The battle is not over and not every future quarter will be as positive as this one, Chen said.

Still, the company has come a long way.

“I don’t know how many companies are able to change dramatically from hardware to software,” he said. “Seeds planted are bearing fruit.”

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