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A Look at BlackBerry’s Successful Pivot

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Shift to software and services

BlackBerry (BB) was initially a market leader in the smartphone space. However, competition from tech giants such as Apple and Samsung significantly reduced BlackBerry’s market share over the years, compelling it to exit this industry. BlackBerry has since pivoted to providing software solutions across business segments.

BlackBerry’s Software and Solutions revenue now accounts for over 90.0% of sales. BlackBerry’s sales in fiscal 2014 were $6.8 billion, a decline of 38.0% year-over-year. This revenue decline impacted profit margins. BlackBerry’s gross margin in 2014 stood at 36.0%, EBITDA was just 3.0% of total sales, and free cash flow was -$393 million.

Though sales have fallen to just $916 million in fiscal 2019, BlackBerry’s shift to software improved gross margin significantly. BlackBerry’s gross margin in 2019 stood at 78.0%, while EBITDA was 20.0% of sales and free cash flow was $83 million, or 9.0% of sales.

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BlackBerry has met financial commitments in 2019

BlackBerry had previously outlined its financial goals for 2019 and achieved several of them. The company estimated Software and Services sales growth between 8.0% and 10.0% in 2019. BlackBerry’s Software sales rose 10.0% in 2019. BlackBerry also achieved its target of double-digit growth in Software and Services Billings for 2019.

It aimed to be non-GAAP profitable in 2019, and the company’s adjusted earnings stood at $0.24 last fiscal year. BlackBerry also aimed to be free cash flow positive and achieved the same in fiscal 2019.

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