Why Shares of BlackBerry Tumbled Today

What happened

Shares of BlackBerry (NYSE: BB) slumped on Friday after the enterprise software and services provider reported its first-quarter results. Despite the company beating analyst estimates for both revenue and earnings, the stock was down about 10% at 10:45 a.m. EDT.

So what

BlackBerry reported first-quarter non-GAAP revenue of $217 million, down 11% year over year but about $7.4 million above the average analyst estimate. Enterprise software and services revenue tumbled 17.8%, but that decline was offset by a 30.6% increase in technology solutions revenue and a 96.9% increase in licensing, IP, and other revenue. Total software and services revenue, which includes all three categories, grew 14% year over year.

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Non-GAAP earnings per share came in at $0.03, beating analyst expectations by $0.03. On a GAAP basis, the company posted a loss of $0.11 per share, worse than a loss of $0.06 per share in the fourth quarter of last year. BlackBerry posted a significant profit in the prior-year period, although it was entirely due to an arbitration award.

BlackBerry CEO John Chen commented on the company’s success in the automotive market: “I am pleased that BlackBerry QNX software is now embedded in over 120 million automobiles worldwide, doubling the install base in the last three years. We are very excited about the opportunities ahead of us in automobiles and in other EoT verticals.”

Now what

BlackBerry expects full-year software and services billings to grow by a double-digit percentage, with software and services revenue growth between 8% and 10%. Non-GAAP EPS is expected to be positive, while free cash flow is expected to be in the black excluding the impact of restructuring and legal proceedings.

While BlackBerry’s results were better than analysts were expecting, a double-digit revenue decline and a worsening GAAP net income may be what’s driving down the stock. Guidance for the full year calls for a slowdown in software and services growth compared to the first quarter, so that may also be a factor.

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Timothy Green has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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