Key Trends To Watch As BlackBerry Publishes Q3 Results

BlackBerry (NASDAQ:BBRY) is expected to publish its Q3 fiscal 2018 results on December 20, reporting on a quarter that likely saw the company’s core software and services business post growth as its service access fee and handset related businesses continued to decline. Below we take a look at some of the key factors that are likely to have driven the company’s performance over the quarter.

Trefis has a $10 price estimate for BlackBerry, which is slightly below the current market price.

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Enterprise Software Sales

BlackBerry’s core enterprise software and services revenues grew by close to 8% year-over-year in Q2 FY’18 to $91 million on a GAAP basis, driven by new customer wins for its Unified Endpoint Management solution. BlackBerry could have more room to grow in the long-run, as the broader enterprise mobility management is expected grow at a rate of about 18% over the next four years, rising from $1.86 billion in 2017 to about $3.39 billion in 2021, per the Radicati group. The company’s focus on highly regulated verticals such as government and banking and its shift towards a subscription-based model are likely to be drivers of revenue growth in the near term. Separately, BlackBerry could also see an upside from its professional services business. Revenues grew by over 40% year-over-year in Q2, albeit from a small base, driven by increasing traction for the company’s cybersecurity consulting practice.

Patent Licencing Could See A Lull

Things could be relatively muted on the patent licensing front for the quarter. While BlackBerry outlined about $100 million or so in IP revenue for FY’18, the company has already booked about $88 million in revenues in this segment over the first half of the fiscal year alone, driven by licensing deals with Ford, Blue, and Timex. Assuming that $100 million forecast still stands, this implies that these revenues could decline to just about $12 million over the second half of FY’18, potentially limiting these high-margin revenues for the quarter.

Updates On New Technology Bets

BlackBerry’s Technology Solutions segment focuses on emerging areas such as the Internet of Things and automotive technology. During the previous quarter, BlackBerry said that it signed a deal with Delphi under which the auto components behemoth will use its QNX software to power its self-driving platform. The company also saw design wins with Visteon and other automotive suppliers for advanced driver assist systems (ADAS). We will be looking for updates on these deals. On the fleet management front, BlackBerry has been focusing on scaling up the distribution footprint of its Radar solution, while also launching a lower cost version called Radar Lite, which BlackBerry estimates can boost the total addressable market for Radar from 8 million units to 28 million (related: Does BlackBerry Have A Shot At Success In The Fleet Management Market?).

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