BlackBerry: Can it find a way to grow?

BlackBerry's third quarter revenue came in well below expectations and CEO John Chen said the focus will now turn to growth. A lot is riding on BES 12.

BlackBerry CEO John Chen said the company will "probably need a couple quarters" to show revenue growth as it expands distribution, revs BES 12 and continues keep costs stable.

Chen's remarks, made on BlackBerry's third quarter earnings conference call, indicate that the company remains a work in progress. The company has focused on costs and profit margins, but now needs to turn to growth, said Chen.

Tech Pro: BES 12 review: Better, but patchy, support for non-BlackBerry devices

Indeed, BlackBerry's third quarter illustrated a major sales decline. BlackBerry reported a net loss of $148 million, or 28 cents a share, on revenue of $793 million, down from $1.19 billion in the same quarter a year ago. Wall Street was expecting BlackBerry to report sales of $931.5 million for the quarter. For the nine months ended Nov. 29, BlackBerry's revenue has been more than halved.

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On the bright side, BlackBerry's non-GAAP earnings were penny a share and the company has $3.1 billion in cash and investments. BlackBerry said it expects to return to growth in fiscal 2016 and will be at least break even on cash flow.

Also: Buying enterprise mobility management: How important is independence? | BlackBerry Classic: Old-school keyboard cool or needless nostalgia? CNET: BlackBerry Classic Review

What's unclear is whether BlackBerry's moving parts add up to sustained revenue growth.

Among the notable items:

  • BES 12 will take about six to nine months for the sales cycle to kick in. BlackBerry did announce some key wins such as Boeing, Tata and Ocean Capital Investments. BES 12 will also support the latest Android OS. Chen said:

We have a successful BES 12 beta program with 89 customers already fully deployed.

Only one month after we launched our BES 12. And 174 more beta customers have plans to roll out a BES 12 within the next 12 months. By the way, of all these beta customers, 70% of that, number of the beta customers are on mixed OS environment.

  • BlackBerry was able to fulfill about 200,000 Passport preorders and now has manufacturing lead times of four to six weeks.
  • Passport revenue will mostly be recognized in the fourth quarter due to out-of-stocks.
  • BlackBerry Classic has more preorders than the Passport did.
  • The company is getting some play in carrier retail stores.
  • At CES, BlackBerry will outline its Internet of things roadmap.

For real growth, Chen will have to deliver on his goal to double software revenue for the fiscal year ahead. Chen said monetization will start to kick in about 9 months. The problem is that software and other revenue for BlackBerry was only 8 percent of sales in the third quarter with the remainder split between hardware and services.

Going forward, it's not clear that BlackBerry can do more than hold the fort on the hardware side. The real revenue growth will come from BES 12. Chen said the conversation with enterprise decision makers has changed. Last year, CIOs were wondering whether BlackBerry would be around. Today, the discussion revolves around BlackBerry's enterprise mobility management.

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