Despite First-Quarter Loss, BlackBerry Software Sales Soar

BlackBerry Tuesday reported a first-quarter loss but said its software and technology licensing revenue soared, which CEO John Chen said represented the company's renewed focus on mobile device management and security software as opposed to the company's lagging hardware business.

"I am pleased with the strong performance of our software and technology business. This is key to BlackBerry's future growth," said Chen. "Our financials reflect increased investments to sales and customer support for our software business. … We believe these actions are prudent and necessary to grow the business and we believe the remaining milestones in our strategic plan are achievable."

BlackBerry's software and technology licensing sales, which encompass its BES12 mobile device management software for management of BlackBerry, iPhone and Android-powered smartphones, rose 150 percent to $137 million, from $54 million in the same quarter last year.

[Related: BlackBerry Puts Eggs In Android Basket To Bolster Software]

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Chen outlined steps BlackBerry has taken this quarter as part of its increased investment in security software, including plans to acquire file-sync-and-share solution provider WatchDox, which will strengthen BES12's ability to secure documents.

Investors were bullish on this strategic path as shares for the Waterloo, Ontario-based company rose 8 percent to $9.97 in premarket trading, according to The Wall Street Journal.

Despite strong software sales, BlackBerry once again posted an overall quarterly loss for the first quarter ended May 30, with revenue dropping to $658 million from $966 million in the same quarter a year ago, leading to a loss of 5 cents a share.

The loss comes as BlackBerry continues to struggle to turn around its business from handset-dominated to software-focused. BlackBerry, once the leading vendor in the hardware market, has continued to falter in smartphone sales, which has continued during the first quarter as hardware sales dropped to $263 million from $379 million in the year-ago quarter.

In addition to its planned WatchDox acquisition, BlackBerry has been investing in software for the enterprise mobile security market over the past year through a slew of partnerships and other acquisitions.

In September, the company acquired U.K.-based SIM service company Movirtu, which targets BYOD policies through services that enable users to have a company and personal phone number on one device. BlackBerry in December acquired SecuSmart, a German company specializing in voice and data encryption, and later partnered with Samsung and IBM in March to unveil SecuTablet, an ultra-secure version of the Galaxy Tab S 10.5, an ultra-thin HD tablet equipped with SecuSmart's micro-SD security card.

Partners, for their part, see security and MDM-related software deployment as the future for the company, particularly in niche markets that may need to protect sensitive data, such as financial services.

"The BlackBerry brand needs to continue innovation in the software space, I believe, to remain relevant and in front of their clients as a viable set of products for the business community," said Robby Hill, founder and CEO of HillSouth, a Florence, S.C.-based BlackBerry partner. "Enterprise clients and certain verticals like government and financial services are always going to be looking for additional mobile data protection and security, and the alliances BlackBerry takes advantage of may allow them to grow their revenues and boost their sales and involve the channel in pushing new services onto existing mobile platforms."

Douglas Grosfield, president and CEO of Xylotek Solutions, a Cambridge, Ontario-based BlackBerry partner, agreed.

"BlackBerry has made huge strides toward regaining their strength and profitability as they lessen focus on hardware manufacturing, though staying a leader in terms of hardware design," he said. "Software, an area in which they have always maintained a leadership role in the mobile space‎, must remain a primary focus. … We remain confident, as they are, that they are on the right path and gaining strength, despite in-the-moment speed bumps that are inevitable in times of regrowth."

PUBLISHED JUNE 23, 2015