BlackBerry software shift kicks in, but device business remains weak – Mobile World Live

BlackBerry software shift kicks in, but device business remains weak

23 JUN 2015

BlackBerry announced Q1 results which showed its shift to focus on software is starting to take effect, with John Chen, the company’s CEO, describing this business as “key to BlackBerry’s future growth”.

Software and technology licensing revenue of $137 million was up 150 per cent year-on-year, making up 21 per cent of its total sales – hardware accounted for 40 per cent and services were 38 per cent.

BlackBerry made no reference to recent speculation that the company is set to support Android OS in its device portfolio.

The company trumpeted 2,600 enterprise customer wins in the quarter and, reflecting its attempts to position itself as the enterprise mobility management player of choice regardless of platform, approximately 45 per cent of licences associated with these deals are cross-platform.

In the results call, Chen detailed where he saw growth in software and technology coming from. This will be a mix of growth in its existing core enterprise management platform (BES); added to gains from acquired companies such as Movirtu, Secusmart and WatchDox, a “secure enterprise file-sync-and-share player” acquired during the first quarter; and technology licensing deals.

In addition, the BBM messaging service will make a contribution, “although it’s off to a slow start in my opinion,” the executive said. “BBM I still need to work on,” he said.

The executive indicated that the company is also still looking at making acquisitions, with the targets likely to be “extending what we have, and also in the IoT world”. But the ever-bullish Chen also didn’t rule anything out, arguing that “I never will turn down a transformational deal”, even if this is not currently on the cards.

Cisco deal
Also announced today was a “broad patent cross-licensing agreement” with Cisco, covering the two companies’ respective products and technologies. While specifics were not revealed, BlackBerry said that it will “receive a license fee from Cisco”.

The statement also noted: “BlackBerry and Cisco have a long history of technical cooperation and intend to further collaborate under this agreement.”

On the call, Chen said that a second deal had also been signed with “another major technology provider”, but that this was to remain “off the radar”. The technology licensing business has a “very deep pipeline”, he continued, but there is some uncertainty on when deals will close.

But, when it came to devices, the picture was somewhat bleak. The company recognised hardware revenue on approximately 1.1 million smartphones, with an ASP of $240. This compares with 1.3 million in the prior sequential quarter, meaning increased availability of BlackBerry Classic is having little positive effect in terms of volume, although ASP has increased from $211.

Chen said that sales of Classic are on an “uptick”, and people are also continuing to buy its Passport device. With regard to the recently available Leap, it is “a little early to tell”.

In order to bolster its hardware business, and following an earlier deal with Foxconn, BlackBerry has also entered into joint development and manufacturing agreements with Compal Electronics and Wistron.

These deals will “reduce the time to market of new devices, streamline the supply chain, leverage greater economies of scale and enable resource and fixed asset reductions for greater business efficiency – which are all significant steps toward BlackBerry achieving profitability in its devices business”, it said in a statement.

Chen also referenced a recent restructure in the hardware business, including cutting some spending and moving some resources to leverage potential growth sectors such as software and IoT.

For the period, the company reported a net profit of $68 million, compared with $23 million in the prior-year period, on revenue of $658 million, down from $966 million. Operating income was $89 million, up from $20 million.

Chen said: “Our financials reflect increased investments to sales and customer support for our software business. In addition, we are taking steps to make the handset business profitable. We believe these actions are prudent and necessary to grow the business and we believe the remaining milestones in our strategic plan are achievable.”

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Steve Costello

Steve works across all of Mobile World Live’s channels and played a lead role in the launch and ongoing success of our apps and devices services. He has been a journalist...More

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