The Takeaway: BlackBerry looks to software for recovery

As BlackBerry struggles to regain its footing in the mobile market, it’s finding that revenues from licensing its software and technology to companies are a rare bright spot in an overall moribund financial picture.

The company reported quarterly earnings this morning, with revenues of $658 million — off sharply from a year ago. (First-quarter revenues for the same period in 2014 were $966 million.)

BlackBerry also reported a 5-cents-per-share earnings loss, worse than the 3-cent-per-share loss Wall Street had expected. Even so, BlackBerry CEO John Chen was upbeat during a webcast Q-and-A about the quarter. “…We’re definitely on solid financial footing,” he said. “We’re making good progress on distribution, on product portability and…on the software side, we’re obviously quite pleased with the quarter.”

Specifically, the company said:

• Hardware remains the company’s chief source of revenue, accouting for 40% of the $658 million. Services comprised 38%, with software and technology licensing at 21%. Hardware revenue was based on sales of about 1.1 million BlackBerry smartphones.
• It collected $137 million in revenues for software and technology licensing, a whopping 150% increase over the first quarter of 2014.
• BlackBerry picked up a number of new customers for its latest software products, including BlackBerry Enterprise Service (BES) 12 and its Enterprise Mobility Management (EMM). Chen cited the Royal Bank of Scotland as one of numerous government or financial sector customers, though offered few additional specifics.
• BlackBerry and Cisco announced that they have entered into a long-term patent cross-licensing agreement “to assure freedom of operation and help remove concerns about patent litigation,” according to Dan Lang, vice president of intellectual property at Cisco.

Despite the continued reliance on smartphone sales, Chen said BlackBerry intends to pivot more to software with an eye on returning to profitability later this yearL “We’re not overly concerned (about hardware). More of our focus at the company right now is on expanding the distribution for software….”

Analysts were generally optimistic about the company’s fortunes, but one — Patrick Moorhead, an analyst at Moor Insights and Strategy — urged the company to move fast. “BlackBerry needs to exit the hardware market and get on Android or Windows Phone immediately,” he said. “Few developers want to write to their BlackBerry ecosystem and that’s the kiss of death in the new world.”

With reports from Matt Hamblen at Computerworld.