Canadian software developer and former smartphone maker BlackBerry Ltd. is set to report results for its fourth quarter of fiscal 2017 before markets open on Friday. After several quarters of controlling costs, the company is expected to effectively break even, while demonstrating improvements in some of its nascent software releases. Meanwhile, investors are likely to continue to pay close attention to any progress made by Chief Executive John Chen’s to position BlackBerry as a major mobile security software player while still licensing its brand for devices to be made by third-party manufacturers.
EARNINGS FORECAST: Analysts expect BlackBerry to report earnings per share broke even in the quarter ended Feb. 28, according to Thomson Reuters, unchanged from a year earlier. For the third quarter, BlackBerry posted a small adjusted gain of 2 Canadian cents per share.
REVENUE FORECAST: BlackBerry is expected to report a 37% decline in revenue from a year earlier, to $289.3 million, according to analysts. Third-quarter revenue totaled $301 million.
WHAT TO WATCH:
SOFTWARE & SERVICES REVENUE: Despite the slide in revenue, BlackBerry is expected to report strong growth in its software business, with some analysts pegging the unit’s sales to rise by as much as 20%. Much of that new growth is likely to come from its new Radar and Internet of Things releases. Investors are also expecting the company to provide guidance in its software business for the next fiscal year, with analysts placing targets of 80% gross margins and cash flow growth of about 20% to 25%.
HANDSET BUSINESS: BlackBerry announced it would formally stop making handsets two quarters ago as it shifts its focus to the higher-margin software business. Since then, it has signed deals with hardware manufacturers in India, China and Indonesia to let hardware makers build handsets while BlackBerry will collect royalties providing new smartphones with its various security software packages. Still, analysts expect revenue from its handset business to continue to move sharply lower. Macquarie Securities expects hardware sales to fall by 68% in the quarter, with service access fees — once the biggest driver of BlackBerry’s growth — off the books by the end of next year.
AUTO LINKS: As the ties between auto makers and technology companies continue to deepen, any update on BlackBerry’s QNX business will be welcomed by investors. The QNX software business, closely linked to the company’s Internet of Things strategy, is expected to be a long-term growth opportunity, according to TD Securities. The QNX software suite is already embedded in more than 60 million vehicles and Mr. Chen has often remarked about how it could handle other systems such as over-the-air software updates, connectivity, and advanced driver assistance. BlackBerry’s relationship with the auto sector deepened on Thursday after Ford Motor Co. said it has hired 400 of the company’s engineers in the U.S. and Canada that used to work in its mobility unit.
Write to David George-Cosh at [email protected]
