BlackBerry Ltd Hits Key Milestone In Its Turnaround

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BlackBerry CEO John Chen said the company is very close to transitioning from a smartphone-making business to one that specializes in secure mobile communications. On Thursday, the Canadian firm posted its first-quarter financial results, reporting revenue of $166 million for software and services.

Services most important for BlackBerry

This marks a key milestone not only in BlackBerry’s transition but also in Chen’s turnaround strategy since it is the highest revenue from software and services that the company has reported for a single quarter ever in its history. For the three months ending May 31, revenue from software and services accounted for 39% of total revenue.

In a roundtable interview with reporters at company headquarters, Chen said increasing the company’s software and services revenue by 30% in the current fiscal year is the top priority. He added that the profit margin on software is at 80%, while on a smartphone, it is just 10%.

There appeared to be some confusion on the importance the Canadian firm puts on making the smartphone business profitable again. After BlackBerry’s annual meeting on Wednesday, it was widely reported that Chen said making the handset business profitable was the company’s top priority.

Chen clears up the confusion

Clearing up that point on Thursday, the CEO said the most important task facing the company at the moment is sales of software and services.

“The software business growth is where we put a lot of emphasis on,” Chen said.

BlackBerry dominated the smartphone market for more than a decade, so it seems as if the company’s image is welded to devices. Therefore, it does not come as a surprise that the public, industry analysts and investors all are focusing on BlackBerry’s plans for its smartphone business. Chen said he is tired of answering questions about how long the company will make phones.

“Everyone wants the answer to be (that) I get out of hardware. I am working as hard as I can to create value for the company. I believe I can make money in hardware. If I can’t, I will admit the fact that I can’t,” Chen said.

Chen has said several times in the past that he will decide in September whether the company will continue making handsets and repeated this on Thursday.

In premarket trading today, BlackBerry was down about 5%. Year to date, the stock is down by over 25%, while in the last year, it is down by over 21%.

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at [email protected]

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