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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 Chief Executive Officer John Chen wants them to. The stock too: It rose the most in 15 months.
BlackBerry surpassed its target of $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 4 cents a share, beating out the highest estimate from analysts, and said it would be profitable for its entire fiscal 2018, which began this month. Gross margins were around 60 percent, the company said in a statement. BlackBerry expects to achieve margins of 70 percent for fiscal 2018, Chief Financial Officer Steve Capelli said on a call with analysts. BlackBerry surged as much as 16 percent to $8.08. It was the biggest intraday gain since December 2015. The stock was trading at $7.83 at 1:18 p.m. in New York.
BlackBerry shed the burden of its ever-shrinking phone business by officially outsourcing all device design, production and sales to other companies last year — allowing it to cut back further on costs. The firm 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 BlackBerry’s 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 towards selling phones to wireless carriers like AT&T Inc.
“That was it. I really didn’t have a salesforce,†Chen said. Now it’s 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.