BlackBerry's Q3 tops estimates on strong enterprise software sales

The company's software business continues to grow as BlackBerry saw 3,000 enterprise orders in the quarter.
Written by Natalie Gagliordi, Contributor

BlackBerry's third quarter results topped expectations on Wednesday, bolstered by record software and services revenue.

The enterprise mobility and security software provider reported fiscal third quarter non-GAAP earnings of 3 cents a share on revenue of $226 million. On a GAAP basis, BlackBerry reported reported a loss of 52 cents a share.

Wall Street was expecting break even non-GAAP earnings on revenue of $215.4 million.

The Waterloo, Ontario-based company said total software and services revenue was a record $199 million. Enterprise software and services sales increased 11.5 percent to $97 million, helped by the addition of some 3,000 enterprise orders from customers such as NATO and the US Justice Department.

BlackBerry said intellectual property and licensing revenue was $50 million, up 67 percent from a year ago. Revenue from BlackBerry's Technology Solution group came in flat at $43 million. The company's gross margin rose to 74.3 percent.

"We had a very strong quarter, and I'm very pleased with our results," BlackBerry CEO John Chen said. "We made progresses in expanding our channels across our key growth area. We have significant wins in regulated industry. These accomplishments strengthen our foundation for future growth."

In terms of outlook, BlackBerry expects full year revenue to be in the range of $920 million to $950 million versus the current consensus of $928 million. In its software and services business, the company expects growth between 10 to 15 percent.

"Our strategy is working and our execution is yielding results," said Chen. "We are a market leader in secure endpoint management and embedded software. The validation we have received, from partners, customers and industry experts around the world, speaks for itself."

On a call with analysts, BlackBerry elaborated on its recently announced partnership with Denso and Intel on an integrated system that puts a vehicle's cluster, head unit, infotainment, and entertainment screens on a single processor. For BlackBerry, the deal is seen as a way to move the needle in its Technology Solution group, which was flat this quarter, via sales of its QNX platform.

QNX is one of BlackBerry's main pillars for its software and Internet of Things strategy, especially as the company pivots from hardware to software. The platform enables developers to partition automotive applications based on relation to safety and critical systems, ensuring that any breach in one application can be contained.

With the Denso/Intel partnership, Chen said BlackBerry is aiming to move QNX beyond infotainment.

"As you all know, a year ago we have laid out that as a strategy for QNX," Chen said. "And now we're into integration not only with infotainment but in all different parts of communications in the car. And Denso want to build HMI or human machine interface, which is really a data platform -- a visual data platform. So ASP obviously will go up, there is no question about that. That's the whole strategy behind that which has broadened our reach beyond infotainment."

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