We’re expecting BlackBerry earnings on Friday before opening bell, and at least for now, investors appear to be optimistic. BlackBerry stock moved up by more than 3% today on the NASDAQ, reaching as high as $8.14 per share after solid gains on Tuesday as well.

BlackBerry Ltd Earnings Preview: Investors Optimistic

What to expect in BlackBerry earnings

Raymond James analyst Steven Li, who has a Market Perform rating and $8 per share price target on BlackBerry, said in a report dated March 28 that he expects the Canadian company to report a “sequentially flattish quarter.” He’s looking for a 2% increase in revenue, which would bring it to $558 million, and losses of 21 cents per share. The consensus estimates for BlackBerry earnings are $560 million in sales and losses of 10 cents per share.

In the software segment, which BlackBerry is trying to increase its focus on, he expects revenue from Good Technology to offset the lack of patent licensing revenue. He expects a 24% sequential increase in hardware revenue with 800,000 units shipped. He notes that the company launched its Android-based Priv in Australia, South Africa, India and Nigeria, which should boost sales of the handset.

SAF revenues to keep declining

He expects BlackBerry earnings to show a continuing decline for SAF revenues, which he projects at $142 million, representing a $31 million or 18% sequential decline. He’s going to be keeping an eye on SAF’s impact on the company’s cash flow. Although BlackBerry has been cash flow positive for the last seven quarters, cash flow has been tumbling on the back of declining SAF revenues. He added that

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BlackBerry must replace its SAF revenue stream with growth in software revenue and step the decline in hardware in order to stabilize its free cash flow.

More software growth needed

Li notes that the company has shown improvement in software sales but adds that more improvements are needed in this area.

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He points out that the core software group did show improvements in the third quarter of fiscal 2016 but that the majority of the expected growth for next year is still expected to come inorganically. For fiscal 2017, he said one thing to watch is the Good acquisition, which he sees as potentially offering some promise because together, the companies hold a 25% share in EMM with more than 20,000 customers. That’s almost twice as many customers the next closest competitor has, the UBS analyst noted.

As a result, the combination with Good gives BlackBerry a big install base that it could monetize by selling value-added software. He also reminded investors that Good and WatchDox have also been integrated with BES 12 to unify BlackBerry’s EMM platform.

Patents and Internet of Things

Two other areas to watch are patent licensing. He notes that BlackBerry has struck deals with Cisco Systems, Canon, and International Game Technology but adds that there’s plenty of room for growth here. IEEE ranks the company’s patent portfolio as fifth under Internet Services behind Google, Facebook, AT&T and Verizon. This is an improvement from 2014 when it was ranked in sixth place.

And then there’s the Internet of Things, which BlackBerry is also making progress in. At the Consumer Electronics Show in January, the company unveiled a new asset tracking box which will be available in the summer and offers value-added sensors to measure things like humidity and temperature and detect motion.