BlackBerry gives earnings a little sweet and investors a little bitter

BlackBerry Ltd New York Stock Exchange: BB was once a leader in the smartphone segment in the mid-2000s, when they were known as Research In Motion. Their BlackBerry smartphones had built-in physical keyboards and a trackball that used SMS technology. Its users could be identified by clicking on tiny keyboards and small screens throughout the day. They ushered in the dawn of the smartphone era.

The smartphone revolution passes through BlackBerry

The advent of The Apple company. NASDAQ:AAPL iPhone and Samsung Electronics Co. Ltd OTCMKTS: SSNLF Galaxy smartphones eventually took over the market with on-screen keyboards, larger screens, and lighter, sleeker designs with endless applications. Research in Motion changed its name and identity to BlackBerry, abandoned its bulky smartphones, and transformed itself into a software company focused on enterprise cybersecurity, software licensing, and the Internet of Things (IoT) in computing and technology. Needless to say, the competition was tough, especially against giants like Palo Alto Networks Inc. NASDAQ: PANW AND Fortinet Inc. NASDAQ:FTNT.

Transition from hardware to software

While BlackBerry continued to lose market share among consumers, its QNX operating system was still highly respected for its exceptional security features, including encrypted messaging, threat detection, and secure email. It’s one of the main reasons why the US Department of Defense (DoD) has standardized BlackBerry devices over iPhones as the protocol for its employees. BlackBerry devices were the devices of choice for government agencies to protect sensitive information from espionage and cyber threats.

This has helped the company move away from hardware and embrace software model to further carve a niche in the mobile cybersecurity segment. They hold numerous patents in mobile security and communications protocols. Indeed, Research in Motion was known for its endless litigation in defense of its patents, often perceived as the original “patent troll.”

From Patent Troll to MDM and UEM solution provider

BlackBerry abandoned hardware in 2016 and tried to establish itself in the mobile device management (MDM) and unified endpoint management (UEM) segment. The company even found itself licensing its data analytics and embedded systems to the automotive industry. The company developed its artificial intelligence (AI)-powered Cylance cybersecurity solution, which it claims prevented 133% more attacks, performing 13 times faster and using 20 times less system overhead than the competition. Its IoT business has also emerged as a promising growth driver. The company has struggled to return to its glory days as it has failed to achieve consistency with its results. Check the heat map of the sector on MarketBeat.

Daily pattern of the descending triangle

The daily candlestick chart on BB illustrates a descending triangle pattern. The descending (declining) trendline formed at $3.63 on January 23, 2024, limiting bounces at lower highs towards the flat-bottomed lower trendline at $2.55. The daily relative strength index (RSI) stopped around the 50 band. The triangle failed a breakdown attempt on March 19, 2024, when shares jumped higher from the $2.46 low to fend off the attempt breakout on April 4, 2024, as the stock fell below the descending trend line. Pullback supports are at $2.66, $2.55, $2.34, and $2.20.

BlackBerry analyst ratings and price targets I’m on MarketBeat. The titles of BlackBerry’s competitors and competitors can be found with MarketBeat Stock Screener.

Improve the fundamentals

BlackBerry reported fiscal fourth-quarter 2024 earnings per share of 3 cents, beating analysts’ expectations for a 4-cent loss by 7 cents. Revenue grew 14.6% to $173 million, beating consensus estimates of $150.47 million. Its IoT division’s QNX royalty portfolio rose to $815 million.

Financial metrics for the quarter

The highlight was the all-time quarterly record of $66 million achieved in IoT revenue, which increased 25% year over year. IoT gross margins were 85%. Cybersecurity revenue increased 5% year-over-year to $92 million, with a gross margin of 65%. Cybersecurity ARR increased sequentially by 3% to $280 million. Licensing revenue was $15 million.

Momentum is interrupted by a reduction in driving

While BlackBerry’s fiscal Q4 2024 report was inspiring, its momentum was once again disrupted by bearish guidance. The company expects fiscal first-quarter 2025 EPS loss of 6 cents to 4 cents versus consensus estimates for a loss of 3 cents. Revenue expectations were also lower, with expectations ranging from $130 million to $138 million versus consensus estimates of $149.08 million. Full-year 2025 revenues are expected to be in the range of $588 million to $612 million, below consensus estimates of $627.42 million.

Two steps forward, one step back

BlackBerry named Cybersecurity president John Giamatteo as its new CEO on December 15, 2023. Giamatteo was previously president and chief revenue officer of cybersecurity giant McAfee and COO of AVG Technologies. The new CEO sparked positive sentiment, but plans for a spin-off of its IoT division caused the stock to plummet. On April 3, 2024, a former senior BlackBerry executive filed a lawsuit against Giamatteo and BlackBerry, alleging sexual harassment and incidents with other women. The company denies the allegations, saying, “BlackBerry and Mr. Giamatteo believe these allegations are baseless and intend to vigorously defend themselves.”

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