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BlackBerry’s Software Business Gets a Boost from Cisco Deal

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BlackBerry’s licensing deal with Cisco propelled its software revenues

BlackBerry’s (BBRY) software business remains its only business showing any growth. In fiscal 1Q16, BlackBerry’s software and licensing segment’s revenues grew by a tremendous year-over-year rate of 150%, rising to $137 million. This growth was helped along by BlackBerry’s licensing deal with Cisco (CSCO) in the last quarter. According to a BlackBerry press release, Cisco and BlackBerry have entered into a patent cross-licensing agreement based on which BlackBerry will receive licensing fees from Cisco.

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The chart below shows the progress made by BlackBerry’s software segment over the last few quarters. The company’s other businesses—Hardware, Service, and Other—showed negative revenue growth, as expected. Last year, BlackBerry had announced that it would double its software segment revenues from $250 million in fiscal 2015 to $500 million in fiscal 2016. So far, it’s right on track to achieve this target.

BlackBerry is on track to double its software revenues in fiscal 2016

This isn’t the first time BlackBerry has struck such deals. A few months ago, BlackBerry forged a major partnership with Boeing (BA) to provide secure mobile solutions for Android devices with BES12. The company also made an agreement with Salesforce.com (CRM) to integrate its BES12 solution with Salesforce’s customer relationship management platform. BES, or BlackBerry Enterprise Server, is the server that securely synchronizes emails, contacts, and calendar information with a company’s networks.

According to BlackBerry, the company’s core software revenue will grow by only 20% in fiscal 2016 over revenue of $247 million in fiscal 2015. Some of this growth will come from a number of acquisitions that BlackBerry made over the last few months, which include Movirtu, Secusmart, and WatchDox. The rest will come from its licensing business, which includes the agreement with Cisco.

For diversified exposure to Cisco, you can invest in the Technology Select Sector SPDR Fund (XLK). XLK invests about 3.6% of its holdings in Cisco.

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