BlackBerry Q2 Revenue Misses Expectations

blackberry

The company stock stumbles on poor earnings…

BlackBerry released its second-quarter earnings for the 2020 fiscal year on Tuesday. The report revealed lower-than-expected revenue, causing the company’s stock to drop nearly 12% before the market open.

BlackBerry Chairman and CEO John Chen said in the press release, “In the quarter, our QNX, Cylance, and Licensing businesses executed at or better than our expectations. We achieved break-even non-GAAP earnings per share and generated free cash flow even with increased investments in sales and product development to support future growth.”

The company was once known for its phones but recently had to shift its focus to other areas to find a consistent source of revenue.

After peaking at $146 in 2008, BlackBerry now trades at around $7–$8 per share.

BlackBerry Q2 Earnings Highlights

The key points from BlackBerry’s Q2 2020 earnings report include:

  • Revenue: $216 million, a 22% year-over-year increase
  • Software and Services Revenue: $256 million, a 30% year-over-year increase
  • Earnings Per Share: $0.00
  • Net Loss: $44 million

While the company’s revenue increased by 22%, it missed estimates of $266 million. BlackBerry also missed revenue expectations for its “internet of things” business. The company reported $134 million in revenue from this segment compared to an expected $150 million.

BlackBerry’s operating expenses jumped by 80% to $219 million. The company broke even on earnings but said it expects to turn a profit in this fiscal year.

Guidance

BlackBerry also lowered its 2020 guidance in this latest earnings report.

The company previously expected revenue to increase by 23%–27% in the current fiscal year. But in the Q2 report, the company said it currently expects revenue to grow by 23%–25%.

Management Changes

BlackBerry also announced that “Steve Capelli will move into the newly-created role of Chief Revenue Officer to drive revenue-generating and business development activities across the company.”

Steve Ra will also move from Deputy Chief Financial Officer to Chief Financial Officer.

These management changes will go into effect on October 1, 2019.

Changing Course

BlackBerry was once an industry leader in the mobile communications sector. Now it’s shifting its focus to software and security due to rising competition in the mobile market.

This transition began in 2013 when Chairman and CEO John Chen was brought in to improve the company’s performance.

Chen indicated that BlackBerry’s new focus is to become a leader in secure mobile communications, embedded software, and crisis communications.

The company’s stock is far from its all-time 2008 highs. But it seems it’s moving in the right direction. despite this earnings miss.

The company’s performance is bolstered by new products and services, like QNX, an automotive software that protects vehicles from hacking.

BlackBerry also purchased Cylance in 2018, an artificial intelligence and cybersecurity leader. Regarding this acquisition, Chen said, “We believe adding Cylance’s capabilities to our trusted advantages in privacy, secure mobility, and embedded systems will make BlackBerry Spark indispensable to realizing the Enterprise of Things.”

The company still has a long way to go, but Chen’s focus on software and security is helping to turn things around for BlackBerry.

“We are encouraged by the positive reception on BlackBerry Intelligent Security, and we have a number of exciting new product launches in the next six months,” Chen said in the Q2 press release. “Recent market consolidation has validated our thought leadership and the holistic strategy we shared last year. We are integrating our endpoint management and AI technologies and capabilities on one platform to address the high-growth endpoint security market.”

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