BlackBerry confirms Android phone on weak Q2 earnings

BlackBerry announced Priv, a flagship slider device running on the Android operating system. The device is slated for release at the end of 2015.
Written by Natalie Gagliordi, Senior Writer on

BlackBerry's second quarter losses were wider than expected, but CEO John Chen padded the results with a confirmation of a much-leaked rumor that the company will release an Android-powered handset in hopes of regaining profitability.

The device is dubbed Priv, and it's described as a flagship slider phone running on the Android operating system that includes "the best of BlackBerry security and productivity with the expansive mobile application ecosystem available on the Android platform," according to a statement from Chen.

Priv -- named as a hat tip to BlackBerry's focus on privacy -- is slated for release at the end of 2015, BlackBerry said. The company reiterated its commitment to BlackBerry 10 OS, which is scheduled for a software update in March 2016 to version 10.3.3. The release will bring about more security and privacy enhancements, the company said.

"We are focused on making faster progress to achieve profitability in our handset business," Chen said. "From these initiatives, we anticipate modest sequential revenue growth in each of the remaining quarters of fiscal 2016."

As for the numbers, the company reported a Q2 profit of $51 million, or 10 cents a share, on revenue of $490 million, down from $916 million a year ago. Non-GAAP earnings were a loss of 13 cents per share.

Wall Street was looking for BlackBerry's loss to widen to 9 cents per share on revenue of $611 million.

Excluding IP licensing, BlackBerry's overall software business was up 9 percent quarter-over-quarter. Software license revenue grew 33 percent year-over-year and 14 percent quarter-over-quarter.

On a conference call with analysts, Chen said Priv is key to the company's three-point strategy to grow revenue faster.

"The key takeaway is that we lead in mobile security and now we're bringing the BlackBerry knowhow into the Android ecosystems," Chen said. "As a result we believe we can you address a larger and growing segment of the enterprise space and we believe we can be a leader in this space."

Chen said device revenue should be stable in the next quarter and that software revenue should grow in the double digits, along with software licensing.

"For Q3, we should see a slight uptick in total revenue from Q2. By Q4 our model shows that software and services revenue should offset the decline," Chen said. "So we believe we are on track to reach our $500 million software and services revenue for the full year."

Chen said BlackBerry was able to reduce operating costs from its device business during the quarter, partly by reallocating internal resources to align with its new strategy. Chen said over 50 percent of BlackBerry's employee headcount is now in software and global sales.

Earlier this month BlackBerry announced plans to acquire mobile security rival Good Technology for $425 million. BlackBerry expects Good to add $160 million in GAAP revenue in the first year.

BlackBerry said it finalized its acquisition of AtHoc, makers of a secure software platform for crisis communication, which was first announced in July. BlackBerry did reveal this morning that it paid $250 million for the company.


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