BlackBerry swings into the red as tech company spends to integrate Cylance
BlackBerry Ltd.’s big earnings miss and lower forward guidance has the shares tumbling more than 20 per cent to a four-year low early Tuesday.
BlackBerry’s Internet-of-Things (IoT) division and Cylance cyber security unit both missed consensus estimates and contributed to the miss, according to analysts.
Shares of the Waterloo, Ontario-based company fell the most since Jan. 2015 to the lowest since Oct. 2015 on a full day’s worth of volume in the first five minutes of U.S. trading.
RBC analyst Paul Treiber said the company’s IP revenue was “well above” RBC and Street estimates, but “strong IP licensing revenue doesn’t offset IoT and Cylance shortfall”.
Raymond James analyst Steven Li agreed and said that BlackBerry’s enterprise software group “significantly underperformed” during its fiscal second quarter.
Adjusted revenue from BlackBerry’s Internet of Things business, which includes the enterprise software and technology solutions units, fell 5 per cent to US$134 million, missing estimates for the second straight quarter. Analysts on average had expected revenue of US$150 million from the business.
The company said it now expects current-year revenue to rise between 23 per cent and 25 per cent, compared to its earlier forecast of 23 per cent-27 per cent.
Waterloo, Ontario-based BlackBerry posted a net loss of US$44 million in the second quarter ended Aug. 31, compared with a profit of US$43 million a year earlier, as it invested heavily to integrate recently acquired Cylance.
In February, the company bought California-based cybersecurity firm Cylance, whose software uses machine learning to preempt security breaches.
BlackBerry’s operating expenses rose nearly 80 per cent to US$219 million in the quarter. On a per share adjusted basis, the company broke even, in line with analysts’ expectations. However, the company said it expects to be profitable in the current fiscal year.
Adjusted revenue rose about 22 per cent to US$261 million, missing estimates of US$266 million, according to IBES data from Refinitiv.
BlackBerry shares were down 21.5 per cent at $7.79 Tuesday afternoon.
The company’s shares also tumbled during last quarter’s earnings results as sales from software and services slowed and a recent acquisition contributed less of a boost than some analysts expected.