UPDATE 4-BlackBerry shares fall as doubts on software revenue emerge

Tue Jun 23, 2015 3:23pm EDT
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(Adds comments from CEO, background, details on results)

By Euan Rocha

WATERLOO, Ontario, June 23 (Reuters) - BlackBerry shares fell on Tuesday as doubts surfaced about the sustainability of the sharp growth the former smartphone pioneer reported in crucial software revenues, an area BlackBerry's CEO said he will augment via acquisitions.

The company's shares were down 3.5 percent in afternoon trading. They had risen 8 percent before the market opened after BlackBerry reported first-quarter results that showed a more than 150 percent rise in software and licensing revenues to $137 million.

Initial investor elation over that growth, however, was later undermined by uncertainty over how much came from recurring revenues, versus one-time licensing payments.

As the Waterloo, Ontario-based company transforms from being a hardware-driven smartphone maker to a more software-focused entity, all eyes are on the growth it gets from its core device management platform BES12, which manages and secures all manner of traffic on Android, iOS, Windows and BlackBerry devices.

"When the headline hits, you say 'wow they really blew out that software number, good for them, they're starting to get some traction'," said BGC Partners analyst Colin Gillis. "But, of course, it's not truly $137 million because there is some licensing in there."

BlackBerry said two new licensing deals, one with Cisco Systems Inc and one with an unnamed party, made a "significant contributions" to software revenue in the quarter, but it did not disclose the terms of the agreements. It was also not clear how much they would boost revenue in future quarters.

On a conference call, analysts grilled the company on its business and Chief Executive John Chen vowed to follow up with more details. Chen later told media that overall software revenue growth was roughly around 30 percent year-over-year. However, it was still not clear what percentage of the $137 million in software revenue was recurring in nature.   Continued...