Canadian phonemaker, BlackBerry Ltd (BB.TO) reported first-quarter sales that missed analysts’ forecasts due to an unexpected drop in its high-margin software and professional services sales.
This sent its shares down more than 10 percent in early morning trade, on Friday, June 23.
The news troubled investors because growth in software sales, which is at the heart of Chief Executive John Chen’s plan for turning around the company, fell 4.7 percent to $101 million in the first quarter from a year ago.
Company executives said on a conference call they expect software sales to grow this year in line with previous forecasts.
“It’s going to be a more of a second half growth, I think,” BlackBerry Chief Executive John Chen said on the call, adding the company was comfortable that the company would achieve 10 percent to 15 percent software sales growth.
The company also said the first-quarter drop was due to a decline in professional services, which went from $27 million in the fourth quarter to “almost nothing” in the first quarter.
The decline was “surprising,” said Morningstar Research analyst Ali Mogharabi. “You don’t expect it from a company that’s still in an early-stage of enterprise software growth,” Mogharabi said.
Chen said that analysts had not anticipated the drop in professional services when drawing up forecasts for the category that includes the closely watched, high-margin software sales.
Investors had high expectations going into BlackBerry’s (BBRY.O) Friday report. The stock had gained about 60 percent since its last quarterly results in March to Thursday’s close hopes sales were poised to take off under a turnaround effort focused on selling industrial software to businesses.
The company reported revenue on adjusted basis of $244 million for the quarter ending May 31, missing analysts’ estimates of $264.5 million, according to Thomson Reuters.
Profit in the same period totaled $671 million, or $1.23 per share, compared with a loss of $670 million, or $1.28 per share, a year earlier. (blck.by/2sJnsFS)
The quarter included a $940 million arbitration payment from U.S. chipmaker Qualcomm Inc (QCOM.O).
