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BlackBerry Falls Most in Year as Earnings Report Disappoints

Simran Jagdev
(Bloomberg) -- BlackBerry Ltd. shares fell the most in a year after reporting sales from its software and services unit slowed and a recent acquisition contributed less of a boost than some analysts expected.Revenue in the fiscal first quarter was $247 million, the Waterloo, Ontario-based company said Wednesday, up 16% from a year earlier. BlackBerry reorganized its reporting units, combining the business technology solutions group with the enterprise software and services unit. Now grouped under the Internet-of-Things division, it reported revenue of $136 million, which was down from $147 million in the fourth quarter.Steven Li, an analyst at Raymond James, said any shortfall would have likely come from enterprise software, since the business technology solutions revenue stream is “typically stable and growing.” Part of the weakness also could have come from a reorganization of the sales division, according to Todd Coupland, an analyst at CIBC.After BlackBerry’s $1.4 billion acquisition of cybersecurity firm Cylance, which closed in February, some analysts were expecting to see stronger revenue contributions in the first full quarter in which the purchase is on the books. Revenue from Cylance was $32 million in the three months ended May 31. “People were hoping Cylance would beat expectations more than it did,” Coupland said in an interview. There are also concerns about Crowdstrike Holdings Inc., a competitor in cybersecurity, which is growing at a higher rate than Cylance, he said.Key InsightsAdjusted earnings per share of 1 cent beat analysts’ average estimate of breakeven in the quarter, as BlackBerry absorbed the Cylance acquisition.Shares fell as much as 10% to $7.47. It was the biggest decline for BlackBerry since last June. The stock had gained 17 percent through the close on Tuesday.Under Chief Executive Officer John Chen, the company has been positioning itself as a leader in cybersecurity. Cylance will enable BlackBerry to add artificial intelligence capabilities to its existing software products. The purchase was BlackBerry’s largest acquisition in seven years.BlackBerry is now focused on its connected and autonomous vehicle technology business, QNX, to drive growth. “The next thing that we have is to put the Cylance AI on to QNX,” Chen said on an earnings call.Know MoreEarlier this week, the Waterloo, Ontario-based company said its security and connectivity software was now installed in 150 million vehicles, up 25% from a year earlier. BlackBerry’s QNX technology is used by carmakers such as Honda Motor Co., Ford Motor Co., and BMW AG in driver assistance and hands-free systems, among other things.BlackBerry reaffirmed it expects annual adjusted revenue growth of 23%-27% in fiscal 2020.Read the statement here.(Updates with share trading this year. A previous version of this story corrected the day that company reported in second paragraph.)To contact the reporter on this story: Simran Jagdev in Toronto at sjagdev1@bloomberg.netTo contact the editors responsible for this story: Molly Schuetz at mschuetz9@bloomberg.net;David Scanlan at dscanlan@bloomberg.netFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

(Bloomberg) -- BlackBerry Ltd. shares fell the most in a year after reporting sales from its software and services unit slowed and a recent acquisition contributed less of a boost than some analysts expected.

Revenue in the fiscal first quarter was $247 million, the Waterloo, Ontario-based company said Wednesday, up 16% from a year earlier. BlackBerry reorganized its reporting units, combining the business technology solutions group with the enterprise software and services unit. Now grouped under the Internet-of-Things division, it reported revenue of $136 million, which was down from $147 million in the fourth quarter.

Steven Li, an analyst at Raymond James, said any shortfall would have likely come from enterprise software, since the business technology solutions revenue stream is “typically stable and growing.” Part of the weakness also could have come from a reorganization of the sales division, according to Todd Coupland, an analyst at CIBC.

After BlackBerry’s $1.4 billion acquisition of cybersecurity firm Cylance, which closed in February, some analysts were expecting to see stronger revenue contributions in the first full quarter in which the purchase is on the books. Revenue from Cylance was $32 million in the three months ended May 31. “People were hoping Cylance would beat expectations more than it did,” Coupland said in an interview. There are also concerns about Crowdstrike Holdings Inc., a competitor in cybersecurity, which is growing at a higher rate than Cylance, he said.

Key Insights

Adjusted earnings per share of 1 cent beat analysts’ average estimate of breakeven in the quarter, as BlackBerry absorbed the Cylance acquisition.Shares fell as much as 10% to $7.47. It was the biggest decline for BlackBerry since last June. The stock had gained 17 percent through the close on Tuesday.Under Chief Executive Officer John Chen, the company has been positioning itself as a leader in cybersecurity. Cylance will enable BlackBerry to add artificial intelligence capabilities to its existing software products. The purchase was BlackBerry’s largest acquisition in seven years.BlackBerry is now focused on its connected and autonomous vehicle technology business, QNX, to drive growth. “The next thing that we have is to put the Cylance AI on to QNX,” Chen said on an earnings call.

Know More

Earlier this week, the Waterloo, Ontario-based company said its security and connectivity software was now installed in 150 million vehicles, up 25% from a year earlier. BlackBerry’s QNX technology is used by carmakers such as Honda Motor Co., Ford Motor Co., and BMW AG in driver assistance and hands-free systems, among other things.BlackBerry reaffirmed it expects annual adjusted revenue growth of 23%-27% in fiscal 2020.Read the statement here.

(Updates with share trading this year. A previous version of this story corrected the day that company reported in second paragraph.)

To contact the reporter on this story: Simran Jagdev in Toronto at sjagdev1@bloomberg.net

To contact the editors responsible for this story: Molly Schuetz at mschuetz9@bloomberg.net;David Scanlan at dscanlan@bloomberg.net

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.