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BlackBerry's banner year hits snag as software sales falter
[TORONTO] BlackBerry Ltd's string of recent success may have hit a snag.
The Canadian company, which exited the hardware business last year, missed analysts' estimates for total revenue, the majority of which is now made up of software sales. Revenue excluding some costs was US$244 million in the fiscal first quarter compared with the average analyst estimate of US$265.4 million.
The shares fell 5.2 per cent to US$10.49 in early market trading at 7:58am in New York.
The lower-than-projected sales struck a negative note in what has otherwise been a banner year for the Waterloo, Ontario-based company. Shares have surged more than 60 per cent as investors started treating BlackBerry like the growing software company it has turned itself into.
An US$814 million windfall awarded to end a dispute with Qualcomm Inc over royalty payments and positive comments from short seller Andrew Left didn't hurt either.
The Qualcomm payment bolstered BlackBerry's cash reserves, which now stand at US$2.6 billion. That means Chief Executive Officer John Chen could resume making acquisitions to bolster software revenue, a tactic that helped replace some of the company's evaporating hardware sales over the last three years.
Some of that cash will go toward share buybacks, with BlackBerry authorising TD Securities to buy back as much as 6.4 per cent of the company's circulating shares on its behalf. Buybacks have been part of Mr Chen's tool box in his bid to revive the company's fortunes. Shares taken out of public circulation are used to offset the company's employees equity inventive plan.
BlackBerry also re-organised how it reported revenue to reflect its current reality as a software company with a side business in licensing old hardware patents. The new software and services segment accounted for US$92 million in revenue, up 12 per cent from what would have been US$82 million in the same quarter last year.
Mr Chen has said he wants to increase that software number faster than 13 per cent a year, as he fights with competitors like International Business Machines Corp and MobileIron Inc for the growing market in software that helps companies and governments keep their employees' devices safe from hackers.
Licensing revenue was US$32 million, compared with US$25 million last year. Handheld devices revenue, which is made up of licensing agreements for the company's phone brand to company's like TCL Corp, was US$37 million, compared to US$152 million last year when the company still produced its own phones.