BlackBerry (BBRY) stock isn’t worth the average retail investor’s time, but BlackBerry earnings — as we’ve noted — are one of the most entertaining shows on Wall Street, and once again BBRY didn’t disappoint.
BlackBerry earnings missed analysts’ average forecast, according to a survey by Thomson Reuters. Revenue missed estimates, as well. And yet BlackBerry stock rallied sharply in the premarket on the BlackBerry earnings news.
That’s because buried beneath the loss, accounting charges and shrinking top line, revenue from software and licensing revenue rose 150%, which beat the Street forecast by a wide margin.
The software and licensing business is the only reason to own BlackBerry stock. As Chief Executive John Chen said in a press release:
“I am pleased with the strong performance of our software and technology business. This is key to BlackBerry’s future growth.”
It is, indeed. Some folks say every other part of the company is in decline and should be be sold off (cough, smartphones, cough).
But whether that comes to pass or not is immaterial compared to the necessity of the BBRY becoming a player with its software and technology licensing.
That hardly makes BlackBerry stock a buy, however. Sure, software and licensing easily more than doubled, but total revenue from the unit came to only $137 million. It’s quite a stretch to say that improvement justifies a market capitalization of nearly $5 billion.
Furthermore, as impressive as the growth rate was, it’s likely not sustainable. After all, for as good as BlackBerry software and services may be, it’s going head-to-head with a load of competitors, including VMware (VMW), Citrix (CTXS), IBM (IBM), Mobileiron (MOBL) and potentially even Microsoft (MSFT).
BlackBerry Stock and Cisco
In another lift for BlackBerry’s tech software business, BBRY said it signed a long-term patent cross-licensing agreement with Cisco Systems (CSCO). As part of the deal, ORCL will pay BBRY a license fee, which is nice enough, but neither company disclosed the terms. Unless BBRY says something about it very soon, the contribution is almost certainly immaterial.
And then there’s the reality of everything else at BlackBerry sucking wind. For the most recent quarter, BBRY reported a loss of 5 cents a share. Analysts, on average, expected the BlackBerry earnings release to show a loss of 3 cents a share.
Revenue declined slightly year-over-year to $658 million, which also missed Street estimates for $679 million. As recently as 2011, BBRY had annual sales of $20 billion.
As for the formerly famous BlackBerry device segment, sales of smartphones fell to $263 million from $379 million a year ago. According to market research firm Gartner, BlackBerry’s most recent market-share figures came to 0.4%. As recently as five years ago, it was 40%.
Then there’s this: BlackBerry stock rallied about 9% in premarket trading — and then immediately dropped to a loss at the opening bell. It remains down 2% as of this writing.
It’s a great show and here’s to hoping BlackBerry real can turns things around. It’s just not a very good bet.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
