Former smartphone maker BlackBerry just hit a key earnings milestone after nine years, and as its stock jumped on the news, one analyst says the Canadian company is now “back.”
In the latest quarter, BlackBerry said revenue from its QNX software business increased 26 per cent year-over-year. It was also the first quarter in nine years that showed positive operating cash flow, meaning its core business brought in more money than it spent.
In response to the earnings release, BlackBerry’s stock on Bay Street surged about 20 per cent on Thursday.
The Ontario-based technology company has been working to transform its business away from being a smartphone maker over the past several years, but it’s been a bumpy road along the way.
“I think it’s taken some time, and there’s been fits and starts, and there has been some strategic changes along the way.”
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The Morning Show: April 24
What does BlackBerry do now?
In 2013, the company started to focus on software and cybersecurity. Around the same time, Apple’s iPhone started to redefine what it meant to have a smartphone, with surging sales that BlackBerry struggled to compete with directly.
BlackBerry was losing money from a drop in device sales and was risking bankruptcy while transitioning its business away from making smartphones. This also led to thousands of job losses.
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In 2015, BlackBerry released its last native device, meaning it was the last to use the company’s own operating system. For a few years after, BlackBerry released some devices that featured Android software and other third-party components before releasing its last licensed smartphone in 2018.
BlackBerry decommissioned services for its native software in most devices in 2022, which meant less reliability for older BlackBerry devices.
Since transitioning from a smartphone maker to a software company, one of BlackBerry’s main sources of revenue has been QNX, which is an advanced software system that works in automotive and industrial technologies, especially related to safety.
“It’s widely deployed in automotives. A lot of times it’s not as visible … but it’s critical to establishing safety in the vehicle,” says Crane.
“Everything in terms of an infotainment centre, console or music console, that’s all built on top of QNX’s capabilities, which focuses on safety.”
Crane adds that these technologies are also in demand for use in industrial and health-care applications.
For nine years, QNX was mostly costing more money than it generated, but Thursday’s earnings release marked the first time the company saw a quarter in which the service actually made more money than it spent.
“I think the market is telling you that they’re back,” says Crane.
“I think there’s a lot of excitement from the general public, whether or not they necessarily own BlackBerry.”
BlackBerry’s cybersecurity business has also been a revenue generator, including through government contracts with the federal government.
In March, Ottawa announced the extension with BlackBerry through Shared Services Canada (SSC) to secure voice, messaging and file-sharing services for approved government users.
“The public is realizing that BlackBerry is deployed in many places that you might not see as visible as a smartphone. So yeah, it’s certainly back,” says Crane.
“I think that the future is bright for the company.”
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