BlackBerry improves software growth as earnings fall short

BlackBerry’s attempts to move away from sales of its unpopular handsets to become a software company appeared to gain some traction in its most recent quarter, although the group still missed expectations for revenues and profits.

The pioneering Canadian smartphone group made $137m of revenues from software in the quarter, accounting for about a fifth of sales and bringing it closer to its target for this area.

John Chen, chief executive, has said he wants software sales to contribute about $600m of annual revenue by the end of BlackBerry’s fiscal year, which runs from March. This would work out to about $150m a quarter.

He is trying to turn the company into a “mobile device management group” that controls employee devices securely on behalf of companies and organisations, regardless of whether those handsets run on Apple iOS, Google Android or its own system.

The company has been making several small acquisitions in the device management sector, most recently buying WatchDox , a document sharing service designed to let employees transfer files more securely.

Analysts at UBS said the “primary focus remains on the progress it is making towards reaching its $600m revenue target for software revenues” and that the group was proving “the sceptics wrong — thus far”.

Some have been dismissive of the plan to move into software, noting the presence of strong competitors including AirWatch and MobileIron.

However, Chen said the company had won a contract from MobileIron to manage employee devices on behalf of Royal Bnak of Scotland, , where the majority of bankers use iPhones and Android handsets.

“RBS is an important win for us to become established as the corporate standard for mobile management,” said Chen, who added that BlackBerry had signed similar contracts with Clifford Chance, the London-based law firm, and NCR, which builds customer checkout systems for retailers.

However, there was confusion among analysts as to how much of the software revenue had come from a patent licensing deal with Cisco, which has started paying an undisclosed fee to BlackBerry so it can use some of its intellectual property.

BlackBerry is trying to monetise the trove of patents it owns thanks to its status as one of the first smartphone makers, although analysts said this sort of revenue was not necessarily a good indicator of whether it is building a strong underlying software business.