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BlackBerry CEO John Chen explains why zero smartphone revenue isn’t a problem

BlackBerry CEO

John Chen
Investors looking for evidence that the remodelling of BlackBerry (BlackBerry Stock Quote, Chart NYSE, TSX:BB) has now run its course need look no further than the tech company’s latest quarterly earnings, which report no revenue from the sale of the iconic BlackBerry smartphone.

But with his company’s focus now clearly trained on the software and security business, you won’t catch CEO John Chen crying about it. And besides, there’s always the licensing fees.

Shares of BlackBerry jumped yesterday in response to the company’s fiscal 2019 third quarter financials, which beat analysts’ expectations with a profit of $59 million for the quarter ended November 30, better than the loss of $275 million during its last Q3 and, at five cents a share, better than the Street’s adjusted earnings estimate of two cents a share (All figures in US dollars).

The company’s adjusted revenue also impressed, coming in at $228 million compared to the expected $215.7 million.

“We delivered another solid quarter of performance, resulting in year-over-year double-digit percentage growth for total software and services revenue, earnings per share, and free cash flow” said Chen in a press release . “I'm excited about the pending Cylance acquisition as it will extend our strategy with cutting-edge AI cybersecurity capabilities and, combined with BlackBerry’s capabilities, present the opportunity for revenue acceleration in our businesses, including UEM, QNX and Spark."

A revenue breakdown for the quarter shows $96 million in Enterprise Software and Services, $53 million from Technology Solutions, $68 million in Licensing and IP, $9 million in Service Access Fees and a big blank for Handheld devices, where a year ago, BlackBerry had $9 million in revenue.

But Chen stresses that a lack of handset revenue doesn’t mean the BlackBerry name in mobile is dead, just that other companies —TCL Communications, for example —will be paying BB for the right to do so.

“This is a quarter where we had zero,” says Chen, to BNN Bloomberg. “But everybody needs to know that BlackBerry will still have handsets, but we’re going to get the handset revenue through royalties because we have licensed some of our technologies, our operating systems and what was our brand to a number of [Original Equipment Manufacturers] out there.”

“They will be building BlackBerry phones and they will be responsible for addressing the market that way,” says Chen. “When they sell those phones, [we’ll] get the royalties on that, as arranged. You will see that more in the Licensing categories.”

“So, we expect to continue to participate in the phone business but not taking the hardware,” says Chen. Last month, BlackBerry took a key step in its remodelling by acquiring California-based cybersecurity company Cylance for $1.4 billion, with the deal expected to close in
February.

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About The Author /

Nick Waddell
Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

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