BlackBerry Earnings Preview: Is Software Gaining Traction?

BlackBerry Earnings Preview: Is Software Gaining Traction?
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BlackBerry is scheduled to release its next earnings report on March 27 before opening bell. The company is expected to continue losing money for the next several quarters.

What to expect in BlackBerry’s earnings report

BMO Capital Markets analyst Tim Long is looking for losses of 3 cents per share on $870 million in revenue for the February quarter, which is the company’s fourth fiscal quarter of 2015. Consensus estimates for the company’s earnings report are losses of 3 cents per share and $802 million in revenue. For the full 2015 fiscal year, Long projects losses of 15 cents per share. He continues to rate BlackBerry at Market Perform with a $10 per share price target.

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The analyst estimates that BlackBerry sold 2 million smartphones in the February quarter and will sell 1.9 million in the May quarter. Of those numbers, he expects 1.7 million of the February quarter units will be BlackBerry 10 devices, while 1.6 million of the May quarter units will be BlackBerry 10 units. Unfortunately he thinks these estimates could end up being too high because availability of the new Classic smartphone was limited during the February quarter. Consensus estimates for BlackBerry 10 unit in the quarter suggest 1.5 million.

Long expects an average selling price of $236 for smartphones in the February quarter and $232 in the May quarter. For BlackBerry 10 units, he expects to see an average selling price of $253 and $247.  Wall Street is looking for an average selling price of $220.

The analyst expects to see service revenue of $315 million for the February quarter and $268 million for the May quarter. He thinks average revenue per user fell to $2.62 in the February quarter compared to $2.72 in the November quarter.

Long projects $72.3 million in service revenue for the quarter and $84.9 million for the May quarter. That’s an increase from $54 million in last year’s February quarter.

Evidence of a software shift at BlackBerry

Long expects next week’s earnings report to demonstrate that BlackBerry is indeed turning things around by shifting toward software. He believes the company’s monetization of BlackBerry Enterprise Server 12 is beginning to go into effect.

He isn’t expecting a large contribution from software until the second half of the 2016 fiscal year, but he does want to see signs of life and indications that software revenue is rising steadily between February and May. He added that the February and May Quarters “should be even more telling as the discounted transition to BES12 ended at the end of December.

What to expect on BlackBerry’s earnings call

BlackBerry has scheduled its earnings call for 8 a.m. Eastern on March 27. He doesn’t care very much about declines in device numbers and services revenue because he thinks software traction is more important right now.

He wants to hear commentary from management about the rollout of BES12. Any comments they have should set expectations for the progress of BlackBerry’s software business. He also expects management to continue targeting a doubling of its software revenues to $500 million in the 2016 fiscal year.

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