BlackBerry Shares Jump as Licensing Revenue Picks Up Steam

Updated on
  • Earnings and sales beat analysts’ estimates in latest quarter
  • Investors are keen to start seeing gains in organic growth

John Chen

Photographer: Michael Nagle/Bloomberg

BlackBerry Ltd. shares soared Thursday after record software revenue helped earnings beat analysts’ estimates, reassuring investors that the former smartphone maker is succeeding in a pivot away from hardware and will hit growth targets this fiscal year.

The second-quarter results suggest a disappointing performance in the first quarter that sent the stock plummeting was an exception rather than the rule in Chief Executive Officer John Chen’s attempts to build a growing, profitable software company. BlackBerry shares gained 13 percent to $10.44 at 10:10 a.m. in New York, its biggest intraday gain since April.

Chen has spent the last several years winding down the company’s phone business and replacing it with software through acquisitions. This quarter, BlackBerry won new customers like UBS Group AG for its main enterprise software products, but the real boost to revenue this quarter came from its licensing business, which brought in $56 million, 250 percent more than the same time last year.

Licensing will eventually contribute about the same revenue as the bigger enterprise software business, Chen said in a call with reporters. The company said it has signed its first deal to license its special version of the Android smartphone operating system. Analysts have expressed skepticism about licensing deals, which can be unpredictable and don’t always bring in a predictable stream of revenue, but Chen said future deals will include ongoing royalties, rather than one-time payments.

All that puts BlackBerry on track to hit Chen’s estimate of 10 percent to 15 percent annual software revenue growth by March, a goal the company reaffirmed Thursday. The company scored another win last week when it signed a deal with auto-parts supplier Delphi Automotive Plc to provide the operating system for self-driving car technology Delphi will be offering in 2019.

Total sales, excluding some items, were $249 million in the fiscal second quarter, the company said, beating the average analyst forecast of $220.8 million. Software and services revenue rose 26 percent.

The positive results will shore up BlackBerry’s position that it will soon be able to produce profits on a quarterly basis, something analysts had expressed skepticism about. In its fiscal second quarter, BlackBerry reported earnings of 5 cents a share, compared with the average analyst projection that the company would break even.

— With assistance by Natalie Wong

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