NEW YORK (TheDeal) -- While BlackBerry executives insist that the smartphone maker-turned-mobile software group is halfway through a two-year turnaround, getting the rest of the way will be harder than finding a millennial who can identify the company's once-ubiquitous device in an antique shop. Having improved profitability, CEO John Chen aims to double software revenue this year. Chen maintains that the Waterloo, Ontario, company can generate $500 million in software sales and another $100 million from BlackBerry Messenger in fiscal year 2016, up from about $234 million the prior year. Must Read: Warren Buffett's Top 10 Dividend Stocks BlackBerry is moving out of turf dominated by Apple and Google , and into the domain of companies such as mobile security developer MobileIron and larger tech groups such as IBM , SAP , VMWare , Citrix Systems . "BlackBerry is going to be a just fraction of its former self," said Wayne Lam, an analyst at HS Global Limited. "It's going to be very, very specific in terms of what it can offer, in terms of enterprise security and software." Software sales rose 20% in BlackBerry's fourth fiscal quarter to $67 million, which does not count BlackBerry Messenger. Chen's target would require sales of about $150 million per quarter. Maynard Um, an analyst at Wells Fargo wrote in a report Monday that the projections involve a "leap of faith" since distribution is "still ramping" and "visibility remains low." UBS forecasts about $450 million in software sales, though analyst Amitabh Passi wrote in a report that BlackBerry "could get close to its $600m goal." Cowen & Co. projects $500 million in fiscal year 2016 software sales. Chen has acknowledged industry watchers' skepticism about the targets. The BlackBerry CEO said during the March 27 earnings call that the boost in sales would be more noticeable around the middle of the fiscal year, after the company could develop recent agreements with carriers such as Sprint . "Give us two quarters that are good because I've got to get the carrier trained," he said. BlackBerry's recent acquisitions reflect the emphasis on software for corporations and large enterprises. Last September the company purchased Movirtu, which develops software allowing one device to use multiple phone numbers, an issue for businesses that allow workers to use their own phones. Over the Summer BlackBerry purchased Secusmart, which develops voice and data encryption software. So the company is not averse to making acquisitions. Good thing, too, because boosting software sales could require making deals. The trick will be to make the right ones. "BlackBerry does have a long history of making strategic acquisitions on the software side," IHS analyst Daniel Gleeson noted. "It also has a long history of making, for want of a better word, very bad acquisitions," he cautioned. "They mainly relate to its consumer device business." For example, BlackBerry purchased cloud services company NewBay for $100 million in 2011 and a year later sold it to Synchronoss for $55.5 million. Given the stakes, the company is more likely to focus on strategic partnerships with device makers, Gleeson suggested, "people you would think are actually competitors with BlackBerry." Must Read: Why Does It Make Sense for Samsung to Acquire BlackBerry? In fact, at the Mobile World Congress in Barcelona earlier this month, BlackBerry announced that it would provide a pair of applications for Samsung's enterprise products. Gleeson predicted that BlackBerry would look to reach more such deals and become the "default security for Android in the enterprise." Google's Android has 53% of the smartphone market, according to Internet analytics company comScore. Apple's iOS has 42% and BlackBerry commands just 1.8% of the market, reflecting the demise of those once-popular "CrackBerrys." UBS expects BlackBerry to sell fewer than 6.5 million devices in fiscal year 2016 and 6.2 million the year after. BlackBerry has cut a deal with Foxconn Technology to manufacture devices and manage inventory, which reduces the economic pain of manufacturing devices as scale declines. IHS analyst Lam suggested the agreement makes it easier for BlackBerry to keep producing phones. "If they're able to eliminate that supply chain manufacturing overhead and lean on Foxconn as their manufacturing and design house, they don't need to exit," Lam said. The company could continue to make devices through Foxconn as long as there is "a compelling reason" and a market for its devices, servers and email services. "Once that critical mass dissipates, we do see a future where BlackBerry isn't a hardware company," Lam said. "Once you dip in annual volume below 2 million or 3 million units of handsets, then it really doesn't make much sense for them to continue." For now, BlackBerry is still trying to compete against Apple, Google and Samsung. Good luck with that. "The silver lining for BlackBerry, in a way, is that if you look across all device manufacturers in the world, very, very few are making any money," Gleeson said. "It's really only Apple and to an extent Samsung." Cold comfort, indeed. Still, as BlackBerry has demonstrated in its recent deals with Samsung, joining the giants is easier than beating them. And that makes success in the software business even more imperative. After all, it's a long way down if the company can't successfully complete that "leap of faith." Must Read: BlackBerry -- Who Knew? -- Wins 'Most Improved' From U.S. Consumers Read more from:
Click to view a price quote on BBRY. Click to research the Telecommunications industry.
from Latest TSC Headlines http://ift.tt/19Es7h4
No comments:
Post a Comment