File photo of John Chen, chief executive officer of BlackBerry Ltd.Pau Barrena/Bloomberg
The John Chen turnaround narrative for BlackBerry Ltd. is still struggling to find its footing.
Shares in the once high-flying smartphone maker surged ahead 9 per cent in premarket trading on the Nasdaq exchange Tuesday, but the rally soon petered out and then reversed course as investors digested first-quarter earnings that at first blush indicated a better-than-expected results in software revenue, a critical segment for growth intended to offset slipping hardware sales.
Mr. Chen, the chief executive officer, has set an ambitious target of doubling yearly software revenue to $500-million (U.S.) by March 2016; revenue in that category soared 153 per cent to $137-million in the quarter, beating most analysts' expectations. The shift to software, as well as services, is part of Mr. Chen's strategy to transform BlackBerry from a hardware-focused company.
These encouraging elements were offset by an adjusted earnings loss of 5 cents a share that was worse than analysts' anticipated 3-cents loss. Revenue of $658-million was also below the Street's expectations of $686-million. And the services segment also disappointed at $258-million in revenue.
"The services miss/decline may continue to sustain lingering concerns about BlackBerry's declining subscriber base," RBC Dominion Securities analyst Mark Sue wrote in a quick-take bulletin Tuesday morning.
But software and technology licensing revenues were well above Mr. Sue's expectations. The surprisingly good showing includes revenues related to the acquisition of WatchDox Inc., announced in April, part of a move to boost BlackBerry's expertise in security-based software.
What shareholders need to see from Mr. Chen at Tuesday's annual meeting is more solid evidence that the software remake has taken hold for good.
Bertrand Marotte