BlackBerry, freed of handsets, looks to software for return to glory

Thu Mar 30, 2017 6:23am EDT
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By Alastair Sharp

TORONTO (Reuters) - Although BlackBerry Ltd (BB.TO: Quote) has extricated itself from the smartphone handsets that weighed on its recent fortunes, the Canadian firm faces a tough slog to convince skeptics it can return to its glory days through an enlarged software business.

The company, which will report fourth-quarter and full-year results on Friday, says it has no major gaps in its software portfolio, thanks to the integration of a string of recent acquisitions.

It concedes, however, that more work is needed to get those offerings into the healthcare and automotive industries and other sectors that it hopes will power future growth.

"The bottom line is: BlackBerry is a completely different beast than it was a decade ago," said Nicholas McQuire, a workplace IT analyst at CCS Insight, a consulting firm. "However, it still needs to educate enterprises, particularly prospects in markets outside its core regulated footprint on the 'new BlackBerry'," he said.

Investors are unsure how to value the company, waiting for guidance from Chief Executive Officer John Chen, who needs a late bump in sales to hit the 30 percent growth in software revenue BlackBerry targeted for its recently completed fiscal year.

BlackBerry's enterprise-value-to-forward-revenue ratio is 3.14, according to Thomson Reuters data, lower than the roughly 4.5 ratio enjoyed by Oracle Corp (ORCL.N: Quote) and Microsoft Corp (MSFT.O: Quote), two of its closest peers now that Blackberry focuses on enterprise software.

The Waterloo, Ontario-based company is expected to barely break even in the fourth quarter and likely notch revenue of less than $1.4 billion in its fiscal year ended Feb. 28, 2017, according to Thomson Reuters I/B/E/S estimates. At its peak, the smartphone pioneer was raking in more than $5.5 billion a quarter.

Blackberry's Toronto-listed shares were trading down 0.4 percent at C$9.40, while the benchmark Canadian share index .GSPTSE was up 0.3 percent.   Continued...

A Blackberry logo is seen at the Blackberry campus in Waterloo, September 23, 2013. REUTERS/Mark Blinch