Services Driven Growth Strategies

Sales Woes Force BlackBerry Earnings Miss

The cell phone company said it was buying back shares and is still confident about second-half growth.
William SprouseJune 23, 2017

BlackBerry said an unexpected drop in sales of its high-margin software and professional services caused it to miss analysts’ forecasts for the first quarter. The company said its professional services revenue went from $27 million in the fourth quarter of last year to “almost nothing” in the first quarter, Reuters reports. Software sales fell to $101 million in the first quarter, down 4.7% from a year ago.

Morningstar Research analyst Ali Mogharabi called the decline “surprising,” saying, “You don’t expect it from a company that’s still in an early-stage of enterprise software growth.”

In a conference call, company executives said they expected software sales to grow this year in line with previous forecasts.”It’s going to be a more of a second half growth, I think,” BlackBerry CEO John Chen said on the call.

Other than to call the drastic quarterly revenue drop in professional services “not repeatable,” Chen didn’t address the issue on the conference call.

Chen said the company was comfortable that it would achieve 10% to 15% in software sales growth.

BlackBerry stock had been up about 60% since it released quarterly results in March. Investors hoped sales would take off under a turnaround effort focused on selling industrial software to businesses, Reuters reported. The latest results sent shares falling more than 10% in early morning trading.

Software sales have been at the heart of Chen’s plan to get away from a focus on consumer electronics, and return to the company’s roots selling to businesses. Chen took the helm in 2013.

BlackBerry reported adjusted revenue of $244 million for the quarter against analyst estimates of $264.5 million. It reported profit of $671 million, which included a $940 million arbitration payment from U.S. chipmaker Qualcomm.

“This is a big disappointment for the stock and likely to cast a pall on the sustainability of the turnaround,” said Tim Ghriskey, CEO of Solaris Asset Management.

BlackBerry said it would buy back 31 million shares of its own stock.