Loss-Making BlackBerry Flags Software Gains

Beleaguered handset maker BlackBerry has made good progress on increasing the revenues it makes from software activities despite reporting a slump in overall sales and another net loss for the March-to-May quarter.

Once a major player in the handset arena, the Canadian firm has failed to keep pace with the likes of Apple Inc. (Nasdaq: AAPL) and Samsung Electronics Co. Ltd. (Korea: SEC) in the touchscreen era and is now trying to reinvent itself as a software business.

Current CEO John Chen has set the organization a target of generating $500 million from software sales this year to February 2016, and revenues came in at $137 million for the first quarter -- 150% more than in the same period last year.

"This is key to BlackBerry's future growth," said Chen in a company statement. "Our financials reflect increased investments to sales and customer support for our software business."

Software revenues were likely boosted by takeover activity aimed at supporting the company's software strategy.

Most notably, BlackBerry recently completed its takeover of WatchDox, which develops security software that works across Android, BlackBerry, iOS and Windows Phone devices.

It hopes to integrate WatchDox with its own mobile management technology and mount a stronger challenge to the likes of AirWatch LLC and MobileIron in the market for mobile device management.

But analysts have sounded caution about the company's recent software performance. "The company said its organic... software revenues grew 20-25% year-on-year [but] this implies organic software revenues were actually flat to slightly down sequentially," said Michael Genovese, an analyst with MKM Partners, in a research note.

"It seems that over 50% of software revenues in the quarter came from one-time licensing payments from Cisco and one other company," added Genovese.

BlackBerry's overall revenues fell by 32% in the first quarter, to $658 million, compared with the same period last year, but the company's net loss narrowed from $60 million to $28 million over the same period.

Chen has been slashing costs since he took the helm in 2013 and BlackBerry's operating expenses have nearly halved in the last year, falling to $221 million in the first quarter from $431 million in the same period of 2014.

Last month, the company, which employs about 7,000 workers internationally, was widely reported to have flagged plans for further job cuts without disclosing the exact details.

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Despite launching several new handsets during the recent quarter, BlackBerry has continued to flounder in the devices market.

According to data from market-research company IDC , BlackBerry's operating system was used on just 0.3% of smartphones shipped in the January-to-March quarter of 2015, down from 0.4% of unit shipments last year and 1.9% in 2013.

"The company shipped only 1.1 million handsets... falling well short of our 1.5 million estimate," noted MKM Partners' Genovese.

Chen believes new development and manufacturing deals with Wistron Corp. and Compal Electronics Inc. may help to restore profitability at the devices business by streamlining the supply chain and allowing it to introduce new products more quickly.

Even so, many business customers have grown wary of doing business with BlackBerry out of concern about the company's future prospects.

Chen has previously drawn attention to BlackBerry's relatively strong balance sheet -- which showed net cash of $2.07 billion in the recent quarter -- when defending the organization.

BlackBerry's share price was trading 3.4% lower on the NASDAQ at 12:00 p.m. EDT.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

thebulk 6/30/2015 | 2:08:35 PM
Re: Is it just me? Well, put. 

I remember when touchscreen phones first came out I thought I would hate giving up my phone with a keyboard, I needed those little thumb nubs after all. That was until I tried a touch screen phone. I was instantly sold. I guess BB didnt get the memo. 
Kruz 6/30/2015 | 2:06:19 PM
Re: Is it just me? I agree. And also, a company that is still coming up with a physical keyboard in times when others are considering a bendable phone - or in other terms, fails to understand the market need - cannot simply keep up with the rest.
thebulk 6/30/2015 | 3:31:42 AM
Re: Is it just me? Its good to pivot, but I just think they dont have enough left in the tank to make a good run at it. 
Kruz 6/30/2015 | 3:08:06 AM
Re: Is it just me? Correct.At best, they are hoping to cut down on product development cost with Android and keep the cash flow.
thebulk 6/29/2015 | 11:53:05 AM
Re: Is it just me? @Kruz, I think thats a crap shoot at best for them at this point, there is just way to much ground to make up. 
thebulk 6/29/2015 | 11:35:25 AM
Re: Is it just me? @mhhf1ve, I see your point, and I do remember Obama wanting to bring his blackberry (or crackberry as they were called back then) to 1600. I had one back in the day and it was a great phone for the time. But the times did change. 

I always though there real value was in enterprise solutions, but it seems that even that ship has sailed. 
Kruz 6/25/2015 | 3:51:25 AM
Re: Is it just me? Let's see what it can do with an Android OS; this would be the final chance for its bleeding devices divison to generate some cash or exit the whole structre and pave the way for the rest of the company to be acquired.
mhhf1ve 6/24/2015 | 2:44:37 PM
Re: Is it just me? thebulk, You're not the only one, but I'm actually not surprised -- considering how huge blackberry was not THAT long ago. Obama almost brought a blackberry to the White House, I think... so it takes time for some tech habits to die off. (Just look at Yahoo? Or Skype? or AOL dialup?)

I will be more surprised to see them actually pull off a complete recovery. If they can turn around like Apple in the late 90s, THAT will surprise me. There's so much competition in mobile devices and software now, and Blackberry's pipeline is... filled with??? 

Maybe if Blackberry can become an easy-to-use encrypted and secure communications device/app maker? I think they might have a chance of turning their enterprise support and proprietary software into an advantage if they can actually solve that problem of making a smartphone that's convenient AND secure. 
thebulk 6/23/2015 | 3:06:15 PM
Is it just me? am I the only one surprised every time i realize that BlackBerry is still alive? 
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