BlackBerry’s evolution from a struggling smartphone manufacturer to an emerging leader in cybersecurity software and connected vehicles is progressing well.
The company now derives over 90% of its total revenue from software and services, with 81% of those sales being recurring. This shift means BlackBerry is less influenced by changing consumer preferences and has shifted focus to corporate clientele.
BlackBerry (BB) announced profits and sales figures on Friday that exceeded Wall Street’s expectations, resulting in a stock increase of more than 15% during late morning trading.
CEO John Chen shared with CNN on Friday that the company’s most notable achievements this quarter were within the connected and autonomous vehicle sector, showcasing a revenue growth of about 30% for the business unit that includes QNX software for cars.
Chen highlighted BlackBerry’s efforts to attract more automotive customers, referencing a collaborative agreement announced in January with Chinese search giant Baidu (BIDU) to co-develop self-driving vehicles.
Under Chen’s leadership, BlackBerry realized several years ago that competing in the device market with extremely thin profit margins during a time of dominance by Apple (AAPL) and Samsung (SSNLF) was futile.
Consequently, BlackBerry opted in 2016 to cease in-house phone production and instead outsourced the manufacturing of devices branded with the BlackBerry name.
Since that decision, the company has fully committed to software development.
BlackBerry aiming for a new ‘Spark’
So what lies ahead? Chen expressed optimism that BlackBerry’s new Spark security platform, akin to a supercharged instant messaging service, could gain traction in the healthcare sector. Spark combines video conferencing, text messaging, and various media types.
BlackBerry is focusing on healthcare to expand beyond its primary markets of transportation, governmental, and financial services.
Investors are also encouraged by the turnaround, as BlackBerry’s stock has surged over 60% since Chen took charge nearly five years ago. While this is impressive, it still lags behind Apple and the Nasdaq’s performance.
Nonetheless, Chen has revitalized BlackBerry’s financial standing, with the company currently holding $2.4 billion in cash and only $740 million in long-term debt. Concerns about BlackBerry’s potential bankruptcy have diminished significantly since Chen’s arrival.
The board of directors is pleased with Chen’s guidance as well, having extended his contract through November 2023, as announced in March.
This development may also dispel speculations that Chen was remaining only long enough to facilitate a sale of BlackBerry to a larger competitor.
CNNMoney (New York) First published September 28, 2018: 10:41 AM ET
