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BlackBerry posts second straight earnings gain

Matt Hamblen | March 30, 2015
BlackBerry's turnaround continues, as the company reported a second straight quarter of profit on Friday, along with expectations of sustained profitability throughout the coming year.

BlackBerry's turnaround continues, as the company reported a second straight quarter of profit on Friday, along with expectations of sustained profitability throughout the coming year.

"Our financial viability is no longer in question," CEO John Chen declared in a conference call, even as he admitted the company is only halfway through a long transition. He also predicted sustained profitability in the current fiscal year that started March 1.

Profits for the quarter that ended Feb. 28 were 4 cents a share, up from profits of 1 cent a share for the previous quarter.

On the negative side, revenues were $660 million, down from $793 in the previous quarter and $976 in the same quarter last year.

BlackBerry has increasingly focused on moving revenues to software from its traditional hardware stronghold, even though it still plans to introduce four smartphones during 2015. The revenue breakdown for last quarter was heavily weighted for hardware with 42% for hardware and 10% for software. Services, however, accounted for 47% of revenue.

Software revenue was $67 million in the last quarter. While relatively small, that represented a 20% increase from a year ago, BlackBerry reported.

That mix is still too heavy on hardware, according to Gartner analyst Ken Dulaney, who has been one of BlackBerry's harshest critics.

"BlackBerry remains dominated by hardware, both in device sales and licensing revenues that come from older BlackBerries," Dulaney said. "To succeed in hardware, you must sell millions of devices to consumers and I don't think this is going to be a fertile area for BlackBerry anytime soon."

Dulaney also questioned how well sales of newer BlackBerry smartphones like the Passport and Classic are doing. BlackBerry didn't discuss sales of specific smartphone models, but reported 1.3 million smartphones sold in the last quarter, with the average sales price jumping to $211, up from $180 in the previous quarter.

In early March at Mobile World Congress in Barcelona, BlackBerry introduced the full-touch BlackBerry Leap smartphone with a 5-in. display.

Chen defended various software initiatives at BlackBerry, including BlackBerry Experience Suite, a portfolio for security, communication, productivity and collaboration that works across iOS, Android and Windows tablets. He said carriers globally are partnering with BlackBerry to distribute software capabilities to customers, along with new smartphones.

"We have the best carrier support worldwide that we've seen in a number of years," Chen said on the call.

BlackBerry also recently announced a partnership with Google to support Android for Work and the BlackBerry Enterprise Service (BES) 12 cloud service.

Chen said the company has sold software to 2,200 customers, including enterprises such as Delta Airlines, the government of Canada, SAIC and HSBC.

But even with the relatively new BES 12 and other software selling to customers, Dulaney said, "We continue to see our Gartner clients calling in and moving to alternatives."

 

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