BlackBerry reckons its $425 million takeover of Good Technology will sweeten a business that continues to sour, in the view of many investors. But the all-cash deal, announced at the tail end of last week, seems unlikely to produce the bountiful harvest BlackBerry craves, even if it does help the beleaguered smartphone maker to achieve its target of generating $500 million in software revenues next year.

Based in Silicon Valley, Good Technology Inc. develops mobile security software for enterprise and government customers and has been a thorn in the side of BlackBerry for many years. The two players have previously clashed in the patents arena and BlackBerry was lambasting Good Technology's products as recently as January this year. The harsh words, though, concealed plenty of admiration for Good Technology's expertise.

Besides eliminating a key software rival, the takeover should strengthen BlackBerry's own enterprise mobility management (EMM) platform. Good Technology appears to serve vertical markets where BlackBerry has been comparatively weak, such as the aerospace and defense sectors. Perhaps more importantly, it should also help BlackBerry to cater to emerging Internet of Things (IoT) devices and opportunities, according to Christy Wyatt, Good Technology's CEO.

Want to know more about the Internet of Things? Check out our dedicated IoT content channel here on Light Reading.

All this fits snugly into BlackBerry's strategy of becoming a bigger software company. John Chen, BlackBerry's current CEO, reckons the company's technology stands it in good stead to play a pivotal role in the IoT industry. Seeking to extend and improve BlackBerry's EMM smarts, Chen has already negotiated a string of takeover deals in this space, acquiring companies such as AtHoc, Movirtu Ltd. , SecuSmart and WatchDox. BlackBerry made $235 million from software sales in its 2015 financial year, but Chen wants to see that figure rise to $500 million in 2016. (See Loss-Making BlackBerry Flags Software Gains and Should Samsung Buy BlackBerry?)

The target looks plausible. In the first quarter of its 2016 financial year, BlackBerry made $137 million in revenues from software and technology licensing -- 150% more than in the same quarter of 2015. It does not expect to complete the takeover of Good Technology until late in its third quarter (which runs from October to December) but says the transaction will be "accretive to earnings and cash flow within the first year after closing." It also thinks it will realize about $160 million in revenues from Good Technology in the first year.

Even so, the deal will not be enough to offset the decline in revenues from the hardware and legacy services businesses, according to Michael Genovese, an analyst with MKM Partners. "BlackBerry is trying to shore up its core knitting but on a $3 billion revenue base it isn't likely to move the needle meaningfully," said Genovese in a research note. "Moreover, while the acquisition takes out one competitor, it does little to improve the EMM competitive landscape, which is rife with both private and public companies gunning for share."

Indeed, BlackBerry's devices business continues to flounder. In the April-to-June quarter, hardware revenues fell by 31%, to $263 million, compared with the year-earlier period, while service revenues dropped by 51%, to $252 million. The company's results statement focused heavily on progress in the software market, which Chen described as "key to BlackBerry's future growth." Yet this currently accounts for just a fifth of overall sales.

Chen has insisted that BlackBerry is "taking steps to make the handset business profitable," but it continues to lose out to Apple Inc. (Nasdaq: AAPL) and handset makers using Google (Nasdaq: GOOG)'s Android operating system and its market share has dwindled. Earlier this year, press reports even suggested the company was working on a device that would use Android, rather than its own BB10 operating system. Such a move would represent an embarrassing climbdown.

It would, however, rather neatly tally with the takeover of Good Technology, which boasts "expertise in multi-OS management" as well as a "broad Android and Windows customer base." The goal is to have a unified platform up and running in a year or so as Chen works on moving the EMM technology to a "software subscription model," says Genovese. Small as it may be, BlackBerry's software business is thriving. But without a miracle on the devices side, the company's decline looks set to continue.

— Iain Morris, , News Editor, Light Reading