TORONTO (BLOOMBERG) - BlackBerry reported fiscal second- quarter sales that missed analyst estimates and said it will stop making its iconic smartphones and focus on its software business. The shares rose in premarket trading in New York.
Fiscal second-quarter earnings per share, excluding some items, was flat, compared with analysts' average estimate of a loss of 5 US cents. Revenue in the quarter was US$352 million, missing estimates of US$390 million.
Software revenue was US$156 million, more than double what it was in the same period last year, but down sequentially from US$166 million last quarter.
BlackBerry has completely outsourced smartphone design and production, a process that chief executive officer John Chen had been doing piecemeal since taking over as CEO almost three years ago. Analysts had been holding their breath for the news after Mr Chen said September was his deadline for making the chronically money-losing device business profitable.
BlackBerry's device business, which it calls "Mobility Solutions," will focus on developing applications and an extra-secure version of Google's Android operating system that it can license to other companies.
"Our new Mobility Solutions strategy is showing signs of momentum, including our first major device software licensing agreement with a telecom joint venture in Indonesia," Mr Chen said in a statement.
"Under this strategy, we are focusing on software development, including security and applications. The company plans to end all internal hardware development and will outsource that function to partners. This allows us to reduce capital requirements and enhance return on invested capital."