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BlackBerry says it plans to end all internal hardware development, signalling a strategic shift for a company that built its reputation on innovative smartphone technology created at its base in Waterloo, Ontario.Bebeto Matthews/The Associated Press

With BlackBerry Ltd. finally exiting the smartphone manufacturing business, what's left? An unclear picture.

First, consider BlackBerry's financial picture: Smartphone sales – what little remain – accounted for 30 per cent of its $352-million (U.S.) in second-quarter revenue. Monthly fees generated from older phones added up to 26 per cent, an amount that has been steadily dropping (the days when BlackBerry could command payments for using its devices has long past). Both businesses are dying, and the latter has been a big contributor to operating profit. But getting rid of the device business will improve margins and reduce working capital needs.

BlackBerry hopes to bring in revenues from licensing its name and smartphone software to other hardware manufacturers, but let's get serious: The company sells just a few hundred thousand devices a quarter, even with the Android operating system, worth about a 0.2-per-cent market share globally. Is anyone betting on a renaissance for the brand with others pushing it?

That leaves BlackBerry focusing almost exclusively on software, centred on three areas: software that helps institutions manage their fleets of smartphones, offerings for the nascent "Internet of Things" market and licensing its intellectual property.

Software revenue amounted to $494-million last year and chief executive officer John Chen said investors can expect a 30-per-cent bump this year. That sounds pretty good at first blush. But investors should do some unpacking to properly assess the software business. What they find might be a bit underwhelming.

First, let's talk about licensing. BlackBerry has about 38,000 "very current" patents, Mr. Chen said earlier this year. That's a lot of intellectual property [IP], and patent licensing is a lucrative racket. Many companies, particularly faded former tech giants, make good coin eliciting payments from others for the pleasure of not being sued for patent infringement.

The problem is licensing revenues can be lumpy. Payments are often negotiated on a one-off basis. Last year, BlackBerry generated more than $120-million in licensing revenue. So far this year, the number is a tiny fraction of that and was zero in the second quarter. It doesn't sound like a big priority for the CEO. "We don't expect a big chunk [of the forecast 30-per-cent software growth] from IP this year," Mr. Chen said Wednesday.

Four-fifths of the remaining $156-million in quarterly software revenue was recurring, a healthy number. The company also said it had 3,000 "customer wins" in the quarter, up from 520 a year ago.

But then there is the question of what the company's organic growth is – how much the business is growing when you strip away the impact of acquisitions. BlackBerry made a few purchases in the back half of last year, including device management rival Good Technology. Good Tech alone was forecast to generate $160-million in revenue this fiscal year.

Strip out the effect of acquired revenues and Raymond James analyst Steven Li estimates BlackBerry's second-quarter organic growth in software was 16 to 18 per cent. He expects it to continue at a 15-per-cent pace. In software, that's okay, but nothing special.

More troubling is that software revenue has been flat for the past four quarters, and actually fell by 6 per cent from the first to second quarter, coming below Street estimates. "At this point, investor visibility to organic software growth is low," RBC Dominion Securities analyst Paul Treiber said in a note. Even without hardware in the picture, Macquarie analyst Gus Papageorgiou foresees revenue growth next year of just 2 per cent. And he is one of the more bullish analysts on the stock. "It is perhaps a little too early to judge how quickly this business can grow," he wrote.

What's left is little to get excited about: a company whose revenue is expected to come in around $1.45-billion this year and just over a billion dollars in each of the next two years. Operating margins in software should rise to the high teens in the next two years, some analysts believe, but the device management field is crowded, so investors should keep a watch on margins.

The bottom line is this is still a sub-$10 stock as far as most analysts are concerned. Unless Mr. Chen can find some incredible opportunity to generate big returns by spending the company's $1-billion-plus cash pile, that seems unlikely to change any time soon.