BlackBerry beats analyst estimates but stock drops sharply

BlackBerry released its quarterly earnings on Wednesday, reporting US$247 million in first quarter revenue, up from US$213 million in the same quarter last year. Its net loss of US$35 million, or nine cents per share, was down from US$60 million or 11 cents per diluted share in last year’s first quarter.

On an adjusted basis, BlackBerry reported a profit of a penny per diluted share — in line with estimates from Thomson Reuters Eikon — and adjusted revenue of US$267 million, $2 million above the analyst estimate of US$265 million.

It was the first BlackBerry financial report to include a full quarter of contributions from Cylance, a California-based artificial intelligence and cyber security company, which was acquired in February for US$1.4 billion.

Cylance contributed $32 million of revenue under U.S. generally accepted accounting principles, or $51 million on a non-GAAP basis — up 31 per cent from the same time last year.

“We are off to a good start to achieve our financial outlook for fiscal 2020,” said John Chen, Executive Chairman and CEO, BlackBerry.

“We are ahead of our schedule in our Cylance integration, while investing in the right opportunities to drive long-term growth and profitability for BlackBerry.  Customers are looking forward to our robust product cycle this year, with over 30 new secure communication products and services to be released.”

The one area where there’s been a bit of technological lag, he said, is the integration of Cylance artificial intelligence technology with QNX software due to the amount of work being done on integrating other products.

He said sales from BlackBerry Cylance are also ramping up slowly, as anticipated, because the two companies have had different markets and it will take time to bring their integrated suite of products to new customers.

“BlackBerry is a mobile-first company. . . Cylance is more focused on PCs and routers and servers and fixed assets.”

Stock drops sharply

BlackBerry stock dropped sharply though as concern about a competitor seemed to overshadow the quarters results. Among possible reasons cited for the decline: insufficient revenue growth from BlackBerry’s legacy business and concern about a competitor to BlackBerry’s recently acquired Cylance subsidiary.

BlackBerry executives were asked during an analyst call why the company’s shares have been underperforming compared with Crowdstrike, a Cylance rival that went public this month.

Since Crowdstrike shares began trading on Nasdaq two weeks ago, they have risen eight per cent. Over the same period, BlackBerry shares have fallen more than 13 per cent.

BlackBerry executive chairman John Chen said he thinks Cylance is “a completely undervalued asset.”

“Now, how long Crowdstrike can sustain that (crazy) number, it’s for you guys to decide.”

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