BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) is dedicating all its resources towards developing and executing new strategies, and it finally seems to be working. It’s been a year since the company shuffled its senior management for the second time and effectively gave up on the consumer smart phone business.
High-risk for BlackBerry
The Canadian smartphone company lowered its costs to match its declining revenue, and is also working to build up new mobile software offerings aimed at corporations. The new business of the company is in a nascent stage, but still shares have soared 85% in anticipation. Shares might slip a bit from the highs, but the company’s goals are more realistic this time, says a report from the Wall Street Journal.
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BlackBerry is more concerned with its software segment, and therefore is offering relatively fewer devices to its fan base. The company launched BES 12 last week, which is key to most of the mobile services designed for enterprise customers, and can be ported across devices. The strategy is already bearing fruit, says the WSJ.
BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) has announced that it offered around 5.1 million licenses for the program, and customers can use the service for free. This is an increase of 50% compared to the numbers garnered two months back. However, the next task for the company will be to convert these customers into paid subscriptions, and there are high risks involved note the WSJ.
Number may shrink now and grow big later
High-margin revenue from the service activation fees came in at $2.7 billion for the fiscal year ended March 1. According to CEO John Chen, this number may decline to around $1.6 billion for the current fiscal year, and tumble further to $800 million in fiscal 2016.
BlackBerry is aiming to grow its software business to around $500 million in annual revenue by fiscal 2016, but it will not be able to counterbalance the decline in service fees. Analysts are expecting revenue to be around $2 billion in fiscal 2016, a drop from $3.8 billion in fiscal 2014. However, BlackBerry Ltd’s new BES 12 platform will hike the revenue per user. The company will rely on its corporate executive customers if the strategy is to succeed..
To recover fully over the medium term, the company will have to continue to invest now to get through the cycle low over the next year or two. “That, along with BlackBerry’s turbulent history, could mean the stock’s sharp run-up of late gives investors pause,” says the report.