BlackBerry flags slowing sales on subscription switch

BlackBerry

Canada's BlackBerry Ltd flagged slowing sales in its software and services business as it switches to a subscription-based model, sending its shares down more than 9 percent.

The company forecast 8 percent to 10 percent growth for the business for 2019, compared with 20 percent in 2018, overshadowing its first-quarter revenue and profit beat.

BlackBerry will no longer be selling its software and services on perpetual licensing basis and will have to convince companies to agree to subscription, Chief Executive Officer John Chen said on a post-earnings call.

The growth guidance is lower than what the market has been expecting, and that's mainly due to the company having to recognize enterprise software revenue based on subscription, Morningstar analyst Ali Mogharabi said.

BlackBerry, which dominated the smartphone market nearly a decade ago before losing out to Apple Inc's iPhones and Android devices, has been trying to win investor confidence and make money by selling software to manage mobile devices to corporations and government agencies.

As part of the transition, the company is also focusing on making software for next-generation driverless cars based on its QNX platform.

CFRA Research Angelo Zino said the turnaround is working for BlackBerry and investors need to keep a long-term view on the company.

"You don't see big top-line and bottom-line growth because the company is still adjusting every quarter from the winding of their hardware business," Zino said.

China's Baidu Inc already uses QNX in the operating system of its autonomous driving project, Apollo. Other partnerships include Tata Motors Ltd's Jaguar, Ford Motor Co and auto technology companies Denso and Aptiv Plc.

The company's net loss was $60 million, or 11 cents per share, for the first quarter ended May 31, compared with a profit of $671 million, or $1.23 per share, a year earlier.

BlackBerry received a one-time arbitration payment of $940 million from Qualcomm Inc in the year-ago quarter.

Excluding items, the company earned 3 cents per share. Analysts were expecting the company to break even on a per share basis, according to Thomson Reuters I/B/E/S.

Total revenue fell 9.4 percent to $213 million, but still beat analysts' estimate of $208 million.

U.S.-listed shares of BlackBerry slumped 9.8 percent to $10.54 in morning trading.