BlackBerry Shares Tumble on Revenue Miss

Struggling software company also lowers revenue outlook for the year

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Sep 24, 2019
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Crippled by weak demand for its products amid increasing competition, Canadian software company BlackBerry Ltd. (BB, Financial) reported disappointing second-quarter 2020 results before the opening bell on Tuesday, pushing U.S.-listed shares lower in premarket trading.

The Waterloo, Ontario-based company, which was previously known for manufacturing smartphones before shifting to software products used in mobile devices and by automakers, posted a net loss of $44 million, or a loss of 10 cents per share, down from a $43 million profit, or a loss of 4 cents per share, in the prior-year quarter. BlackBerry said its performance was affected by the investments associated with integrating cybersecurity company Cylance, which it acquired last February, into its business.

On an adjusted per-share basis, BlackBerry recorded breakeven earnings, which were in line with analysts’ estimates. Adjusted revenue grew 22% from the year-ago quarter to $261 million, but missed Refinitiv’s expectations of $266 million.

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The company also reported that operating expenses for the quarter increased nearly 80% to $219 million.

By segment, sales in BlackBerry’s internet of things business, which encompasses the enterprise software and technology solutions units, declined 5% from a year ago to $134 million. Cylance recorded $51 million in sales, while the licensing division’s revenue increased to $71 million from $56 million. The other segment posted $5 million in sales.

In a statement, Executive Chairman and CEO John Chen said BlackBerry’s QNX, Cylance and licensing businesses performed “at or better” than expected.

“We are encouraged by the positive reception on BlackBerry Intelligent Security, and we have a number of exciting new product launches in the next six months,” he said. “Recent market consolidation has validated our thought leadership and the holistic strategy we shared last year. We are integrating our endpoint management and AI technologies and capabilities on one platform to address the high-growth endpoint security market.”

Despite his optimism, investors were further disenchanted by the cut to the higher end of the company’s revenue guidance for the full year. BlackBerry now anticipates revenue will grow between 23% and 25%, compared to the previous forecast of 23% to 27% growth.

With a $4.1 billion market cap, BlackBerry shares were down 16.58% at $6.27 on Tuesday morning. GuruFocus estimates the stock has fallen 14% year to date.

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Separately, BlackBerry announced it has named Steve Rai as chief financial officer, which will be effective as of Oct. 1. He will replace Steve Capelli, who will become chief revenue officer.

Disclosure: No positions.

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