What's going on?
Shares in Blackberry jumped up almost 10% on Wednesday as the once-ubiquitous phone maker reported that its transformation into a software company was picking up speed.
What does this mean?
Over the past few years, Blackberry has been ditching the whole “selling phones” thing (remember BBM?) in favor of hawking software to big companies and organizations. Today, handheld devices account for a meager 4% of the company’s sales; the majority now comes from cybersecurity software designed for businesses and governments.
On Wednesday, Blackberry reported its best-ever sales figures in the software and services segment and the company’s highest-ever profit margin – both signs that the pace of its pivot away from handheld hardware is quickening. Even though overall revenues are still declining, Blackberry’s CEO says that software sales should soon plug that gap in its balance sheet.
Why should I care?
For markets: It’s been a bumper Blackberry season.
Blackberry reported that total sales for 2017 would come in at the high end of its forecasts – likely another reason for the stock price jumping on Wednesday. Overall, shares in Blackberry are up about 70% this year. While there have been some bumps along the way, the company has continued to make good on its promises to reach profitability (it turned a small profit again this quarter) after hemorrhaging cash in 2016.
The bigger picture: Cybersecurity and connected cars are central to Blackberry’s pivot – but competition is ramping up.
The future success of Blackberry’s turnaround hinges on the company’s ability to keep on expanding the market reach of its cybersecurity software, even as firms like IBM, Intel and Microsoft (among others) are increasingly active in the space. The company is also looking to leverage its growing footprint in the world of automotive tech; more than 60 million cars currently use embedded Blackberry tech for in-vehicle infotainment. Blackberry says that it plans to expand its fleet management tech offering and eventually gain traction in the market for self-driving vehicles.