Here’s Why BlackBerry Saw Its First Revenue Gain In 9 Quarters

December 18, 2015, 3:34 PM UTC
BlackBerry Ltd. Unveils The Square-Screened Passport Smartphone
John Chen, chief executive officer of BlackBerry Ltd., speaks on a Passport smartphone during a Bloomberg Television interview at a product announcement in Toronto, Ontario, Canada, on Wednesday, Sept. 24, 2014.
Photograph by Hannah Yoon — Bloomberg/Getty Images

BlackBerry CEO John Chen’s determination to move the company away from relying on hardware to focus on software sales is starting to pay off.

On Friday, the firm reported its third quarter fiscal 2016 results. During the period ending Nov. 28, BlackBerry’s total revenue was 548 million, up nearly 12% from the previous quarter. It’s the first quarter-to-quarter increase in revenue for BlackBerry in nine quarters. Revenue in the same quarter last year was $793 million.

The reason? Software.

The Waterloo company’s software and services revenue accounted for $154 million of total revenue, up from $78 million in the previous quarter.

“I’m pleased with our progress,” Chen said on a call with analysts, noting the company added 2,713 new enterprise customers in the quarter. Contributing to the positive gains were recent acquisitions, AtHoc and Good Technology.

Around 70% of BlackBerry’s software and services revenue in the quarter was recurring, with Chen stating the goal is to bring that number to 80% within the next year.

Despite strong software sales the company reported a loss of $89 million. Excluding one time charges, the loss was 3 cents per share, beating Wall Street expectations of 14 cents per share.

Shares of BlackBerry (BBRY) were up nearly 10% on the news at press time.

As for BlackBerry’s hardware division, the company sold 700,000 devices during the period. A specific breakdown of sales by model was not released.

The BlackBerry Priv, the company’s newest smartphone, and first to run the Google (GOOG) Android operating system, was available for 22 days in the quarter but its impact was still noticeable. The average selling price (ASP) of handsets for the firm is now $315, up from $240.

Chen stated the company will expand the Priv’s availability to 31 countries by the end of February, up from four countries at the end of the third quarter. Due to the higher ASP and expansion of availability, Chen is optimistic the company’s hardware division will break even in the company’s fiscal fourth quarter.

Chen has previously said if the hardware business doesn’t turn profitable, the company will exit the smartphone market in 2016.

BlackBerry 10, the company’s proprietary operating system for smartphones, is expected to receive an update in the first quarter of 2016, and another later in the year. It’s hard to imagine, however, the company will keep the platform around if the Android-powered handsets continue to remain attractive to customers. During the call, the primary focus of conversation in relation to hardware was surrounding Android and the company’s ability to bring security and privacy to the platform. At one point, Chen noted “look for us to expand on this concept,” in reference to the success the company was seeing with its first Android device.

Total hardware revenue in the third quarter was $214 million, up slightly from the previous quarter’s $201 million.

Looking forward, Chen hinted at a new Internet of things product announcement at CES 2016 in early January as the company demonstrates its QNX platform.

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