Canadian software and security giant BlackBerry (BBRY) reported its fiscal 2015 third quarter numbers recently. Despite a positive bottom-line, the stock took a beating as revenues were in red and shares dropped by more than 5%. For the three months period the company reported net revenues of $793 million, down by a flabbergasting 33% from prior year period's $1.19 billion. Even the bottom line came at a negative $148 million or $0.28 a share. However, after adjusting for non-recurring onetime costs, it improved to $16 million or $0.01 a share.
The Wall Street and the investors weren't much happy about the numbers. But, should the investors really be disappointed? I think we are missing the bigger picture – that of a recovering BlackBerry. Here are some signs that should help the investors keep faith in the tech behemoth.
#1: Improving fundamentals
Revenue is always a key factor while analyzing the numbers of a quarter and the company understands that the performance has been below expectations. But BlackBerry is not bogged down or depressed by this fact. Instead, CEO John Chen during the earnings call said, "It is my belief that we can grow and stabilize the revenue or stabilize and grow the revenue of the company in FY '16 and while we will make every attempt to stay profitable going forward, sustainable profitability only comes from revenue growth and that is certainly our strategy here…To see this revenue growth we probably need a couple of quarters."
John Chen is devising a turnaround strategy and according to the plan right now it was time to focus on lowering losses and building cash. If we take a closer look at the quarter's numbers, we will find both of these occuring. For the quarter losses came to $148 million. Now, compare that with prior year period's $4.4 billion. Isn't that a significant improvement? Even if we compare the figure with sequentially prior quarter's $207 million, the latest figure hints at a recovering bottom line. That's encouraging! Next, turning to the cash position, year to quarter BlackBerry has generated $603 million of cash from operations. Compared to prior year period's $405 million, that's a 49% improvement. Even free cash flow increased to $532 million, up from previous year's $145 million.
#2: Back to the basics
As the smartphone space evolved, BlackBerry, in order to stay competitive, changed a lot of things. Among all that changes the company lost certain things that were responsible for making Blackberry the success story it was. However, the company has realized this and has renewed its focus on bringing back the age-old BlackBerry signature features, such as the very popular trackpad. In September the company successfully launched BlackBerry Passport and recently it launched BlackBerry Classic. Both the devices offer the superior security features that the Canadian phone maker is famous for. The company has brought back the trackpad to life through the Classic model. Both the devices offer a full blown QWERTY keyboard experience that all BlackBerry users yearn for. The company has finally started listening to the king called customer.
Next, John Chen understands the core competency of BlackBerry lies in software security, and that's why he's working on turning BlackBerry from a hardware focused company to a software focused one. During the quarter, equal share of revenues came from the hardware and the services businesses (46% each), and the remaining 8% came from software sales.
#3: A strong new partnership
Yes, you guessed it right. I am speaking of the BlackBerry-Boeing (BA) partnership. It's not a totally new development and those who have been following the stock knew about this for some time now. However, the mention of this made sense in the context of the discussion. Boeing is working with BlackBerry to manufacture a self-destructing smartphone meant for secret government agencies, known as Boeing Black. Though the device will be powered by Google's (GOOG) Android platform, BlackBerry will help the aero major to make it secured using its BES 12 platform.Several high-profile government agencies are already customer of the Canadian tech giant and this partnership should further strengthen Blackberry's position in the software security market, helping it create a virtual monopoly in this space.
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