BlackBerry Ltd (NASDAQ:BBRY) Bets On Software Business And Targets Sales Of $500 Million By March 2016

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BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) is considering going deeper in the software business as part of the strategy to achieving a meaningful turnaround. The company disclosed plans to grow through acquisitions. With $3 billion in the bank, BlackBerry’s CEO, John Chen, believes that the company can both buy growth and innovate organically through increased investment in in-house R&D.

BlackBerry Ltd (NASDAQ:BBRY) is currently pursuing opportunities in software, services and hardware markets. However, the hardware business has been more punitive for the company in the recent times. BlackBerry only sold 0.8 million smartphones in the last quarter and generated revenue of $490 million. Additionally, hardware sales fell short of the $610 million that analysts estimated on the average for the quarter.

Software business

With BlackBerry Ltd (NASDAQ:BBRY) hardware sales failing to live up to expectations, the management of the company has figured out that increased focus on software could give way to true turnaround. BlackBerry’s software sales rose 150% in the last quarter to $137 million.

To build out revenue stream from software, BlackBerry is looking to acquire strategic assets as well as innovate in-house. According to CEO Chen, BlackBerry has made at least five software acquisitions in the last 20 months. The latest major acquisition in the segment was Good Technology for which BlackBerry paid $425 million. Good Technology sells software solution that enables employees to bring their personal devices to work.

With $3 billion in cash, Chen said that BlackBerry is capable of building out its software business with most of the money going to R&D and some funding acquisitions.

$500 million revenue target

Chen is predicting that with proper investment and execution, BlackBerry can generate software revenue of $500 million by March 2016.

Competition in enterprise mobile

The reason BlackBerry Ltd (NASDAQ:BBRY) feels it has a better chance in software than hardware is that its smartphone business is not only slow to pick up, but also coming under increased competition. With its Windows 10 smartphones, Microsoft Corporation (NASDAQ:MSFT) is threatening to displace BlackBerry in the enterprise mobile market. a recent report cited that Windows 10 Mobile was the most secure mobile platform.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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    If Investors lose confidence in BlackBerry’s ability to build a likable smartphone, will they also lose confidence in their ability to build likable software? QNX built the OS for the Playbook which flopped, then they built the OS for BB10. Now BlackBerry is going with Android, this leads me to believe perhaps QNX was a waste of money. The only reason BlackBerry cannot sell a phone is because Chen doesn’t know how to design one that will sell. Chen should not be allowed to decide to abandon hardware sales just because he doesn’t know how. If I applied for a job painting automobiles but found out after I couldn’t paint properly, I can’t decide, well I just won’t paint but I still want my pay cheque. Chen was hired to sell phones and software, if he can’t he should be ousted just as Thorsten was

    • Yes, we are all aware of your opinion, DEVVV. Thank you for sharing and we look forward to you saying the exact same thing on the next BBRY article that gets published.

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