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.
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, , News Editor, Light Reading