BlackBerry is making progress despite “ugly” hardware numbers, says Cormark

Despite some “ugly” hardware numbers, BlackBerry (BlackBerry Stock Quote, Chart, News: TSX:BB) is showing some encouraging signs in its move to an enterprise/software focused business model, says Cormark analyst Richard Tse.

On Friday, BlackBerry released its fourth quarter and fiscal 2015 results. In the fourth quarter, the company posted non-GAAP earnings of $0.04 on revenue of $660-million. The topline fell below Tse’s expectation of $763-million, but earnings bested his target of a loss of $0.07.

“Our focus this past year was on getting our financial house in order while creating a multiyear growth strategy and investing in our product portfolio. We now have a very good handle on our margins, and our product road maps have been well received,” said CEO John Chen. “The second half of our turnaround focuses on stabilization of revenue with sustainable profitability and cash generation.”

Tse says despite the fact that the numbers were mixed for BlackBerry in the fourth quarter, he thinks the important metrics he is watching, such as earnings, cash flow and software revenue, were all positive. He says the company’s goal of a $500-million software revenue target is off to “a reasonable start”. Hardware numbers, he says, are not a big part of his investment thesis that the company has a credible opportunity in the enterprise space.

“We were encouraged with the 24% sequential increase in software revenue to $67 MM during the quarter via expansions and net new customer wins,” said Tse. “And with only a small portion of its existing enterprise subs having converted to BES12, this continues to be the opportunity”.

In a research update to clients today, Tse maintained his “Buy (Speculative) rating and (U.S.) $14.00 one year target on BlackBerry.