Analysts waiting for BlackBerry Ltd.'s next update on CEO John Chen's turnaround effort expect to be disappointed; how much disappointment is the only question.
The first 18 months of the company's transition plan to rely less on revenue from handsets and more on mobile enterprise software will be judged on Tuesday with the company's first-quarter earnings. But analysts are already warning BlackBerry may offer little evidence of traction.
Mr. Chen has pledged that by the end of fiscal year 2016 BlackBerry can hit $600-million (U.S.) in revenues from software sales and BBM services.
While that would only offset declines in its service fees revenues, it's still an aggressive attempt to more than double the $234-million it earned on software in fiscal year 2015.
"All eyes will be on the software revenue line, which needs to show an upward trend to support management's ambitious turnaround goals," wrote Tim Long, analyst with BMO Capital Markets.
"Whether the numbers hit or not, we hope management provides enough metrics to get some transparency on the underlying trends in the software-oriented recovery."
Street consensus seems to be BlackBerry will report $690-million in revenue for the quarter. The expectations include fears that hardware sales will take a hit despite the newer keyboard-focused Passport and Classic handsets.
The past two quarters have surprised analysts by being cash-positive, thanks in part to heavy cost-cutting by Mr. Chen's team.
One of the key challenges the company faces is tough competition for its BES12 platform from other mobile device management players like MobileIron, Microsoft and VMware.
"The BlackBerry brand may not be serving them entirely well in these circumstances," says John Jackson, the research vice-president of mobile and connected platforms for market intelligence firm IDC.
"It is just an incredibly competitive space, and there's the impression [BlackBerry] is a company that remains distressed ... that probably has negative connotations in the broader market."
But Mr. Jackson does not believe it is time to panic yet.
For instance, he rejects the idea that the company should try to push more proprietary BlackBerry software into the cross-platform app market – like it did with BBM.
Examples of possible third-party apps include the BlackBerry Hub inbox, or even the predictive-type software keyboard.
"There's nowhere near the kind of money in [that strategy] that they would need to move the needle," he says.
"That is not the billions with a 'B' business where BlackBerry used to be."
Colin Gillis, senior technology analyst at BGC Partners, Inc., noted that while Microsoft once held back popular Office software from Apple or Android devices, sales of the Surface tablet have actually increased since they ended that restrictive strategy.
That said, he also thinks now is not time to start selling every piece of IP that isn't nailed down.
"I actually like that they are not chasing down too many rabbit holes," he says.
"The ship is no longer on fire. They have done a good job and trying to be cashflow positive – that's great.
"So now the question is, 'How's the transformation going?'"
In a research note, Morgan Stanley's James Faucette wrote that while the target is reachable, the timeline may be off: "If shareholders begin to re-evaluate the trajectory of BlackBerry's enterprise software business ... eventually (2-4 years) building a $600mm/yr software and messaging business seems reasonable to us."
Another option for growth is in the company's embedded-device computing division, which has been the subject of a number of announcements in recent months.
"QNX has got a lot of interesting potential. Security in the Internet of Things, and security in smart cars is going to be incredibly important," says Bob O'Donnell, founder and chief analyst for TECHnalysis Research in California.
"Part of the problem is it isn't sexy and vibrant.
"The general public still thinks about [BlackBerry] phones and they are not looking at the whole picture."
But if Tuesday's earnings feature disappointing numbers for software, hardware and service fees, Mr. Jackson believes analysts will require Mr. Chen to offer something more than promises of the future.
"We may need a John Chen moment of convincing candour and level resetting," he says.
"If there's a CEO in technology who can pull that off, it's him."