Blackberry CEO Breaks Down Q3 Earnings Results

December 20, 2017

Blackberry shares soared after the company beat analysts earnings forecasts. John Chen, CEO of Blackberry, joined us to break down the results.

Blackberry's results were boosted by an increase in business software sales and licensing revenue. Chen says Blackberry has 2 major focuses. The first is the enterprise software business and the other is the auto sector. Blackberry has been in the auto business for 8-10 years, but made a bigger push about 4 years ago, he points out.

Chen says there are 60 million cars on the roads using blackberry software. Looking forward, the company is working on designing new components such as lane-changing and communication capabilities with other cars and infrastructure. He sees a huge opportunity in the space, emphasizing that about 100 million cars are made every year.


FEMALE_1: All right. Well, let's talk some BlackBerry now. BlackBerry shares soaring this morning after the company beat earnings expectations. And joining us now is John Chen, CEO of the company. John it's great to have you with us. And we saw here [OVERLAPPING] sales of. Yes, thank you for joining us. Sales of software and licensing revenue, seeming to be the biggest factors contributing to this success this quarter, is that what you would attribute it to?

MALE_1: Is that what, I'm sorry I missed that last part.

FEMALE_1: In terms of what's driving the success this quarter in the latest quarter which we just got the report from, it seems as if right is the services side of the business as obviously as we've seen BlackBerry say that the hardware and the physical phones are no longer a key focus for this company.

MALE_1: Yes. Yes. So we have two major focus and- and the strength comes in on that. One is the enterprise software business and tied with cyber security needs. And the other one is the auto sectors. And we won a lot of design wins of the autonomous driving platform as well as stay connected called platform. So, those are the two major- major win area.

MALE_2: Well, let's talk a little bit more about the autonomous opportunity for BlackBerry. What specifically are you seeing in terms of growth that allows BlackBerry to be a significant stakeholder in that narrative going forward, and who are some of those key partners that- that you've identified to make sure that the revenue is realized within your business?

MALE_1: Yeah. People, good question. Thank you. The people doesn't really know that BlackBerry has been in the auto business for probably eight to 10 years for that long. And only about four years ago we put together a very major push. We used to be providing infotainment systems to what is called the Tier one audio. These are the Bosch and the Denso and the Delphi of the sort. So, the people you don't know about is 60 million cars um, on the road running around. They're using our BlackBerry software today. And so since four years ago, we focus on designing new component a car like, the lane changing, [inaudible 00:02:08] drivers, telematics, that talk to the Internet. The communication inside a car, outside a car, without a car is called a v2x and then communication with infrastructures, and a long lists of that. We have, I think now we have about 12 different modules in addition to the infotainment. So what you are seeing is really the strength of us winning those. Now in addition to that, our software are now embedded into a lot of the chipset or optimize it with people like Qualcomm and working with the use of Intel for example, and- and also with a lot of the Tier one embedding of technology in their design, Delphi, Bosch, Magna, Visteon, and then of course directly with a comment effector like Ford. So with that we're, pretty much in every part of that ecosystem. Every- every layer of the stack.

FEMALE_1: John we saw that even though earnings and revenues [inaudible 00:03:06] the expectations that earnings actually were down from the same time a year ago, is that because of the heavy investments here into self driving technology in the software and services business?

MALE_1: Yeah. we do- we do a lot of investment and we will continue to do a lot of investment, but we are profitable. We have good cash position. So I-I you know, the company is right on- the right on the right path.

FEMALE_1: So you mentioned earlier 60 million cars on the road are now using BlackBerry's technology?

MALE_1: Yes.

FEMALE_1: Okay. And in terms of the growth [OVERLAPPING] in terms of the growth from there, what is the guidance? How many more cars are you expecting to expand to in the new year?

MALE_1: Oh, um, I hope everyone has a partner selling. So, there are um, I think 100 million cars made every year, 110 million cars [inaudible 00:03:55] vehicle every year. And as time progresses, every one of them will have autonomous vehicle, functionality in it, every one of them will have connected car functionality which is where we excel. And so, you know, I think the market is huge in front of us.

MALE_2: So you have a lot of bears that are out there, perhaps saying that there hasn't been the growth that they would expect in terms of QNX radars. So, in terms of taking what you were investing into outputting your own smartphone and putting that back into some of the radar business, how much of that do you see going back into that and being reinvested into that specific business so that we do see that that incremental growth going forward?

MALE_1: That's a good question. Thank you for doing homework. What we have done is in addition, [FOREIGN] instead of just focusing on mobile handset, we- we have transferred a lot of those technology in what they call the IOT appliance. Radar is an example of the IOT appliance. It happened to be a asset tracking technology, which is [inaudible 00:05:06] of everything you know you- you'll get used to on phone plus some more. And doing analytics and tracking, and you know, GPS and all the environmental things. So, this is early for us. We are winning steadily. We just signed up some really big distributors in the last quarter we announced the revenue, yes, yet to come, a real revenue yet to come. We are already building some. So I think a year from today we ever happened to have a chance to talk about it again. I think you will see that being you know, a reasonable size.

MALE_2: Well, John I speak for us all when I say I think we'd love the- a chance to talk a year out from now again. So, absolutely we'll sign up here today for that. Just you know, one other inkling that we have here in terms of how you're monitoring cyber security space. BlackBerry has been involved in conversations there, and how you're trying to push that industry forward. What- what are some of the prospects around cyber security, and how BlackBerry is looking to partner with some of the major companies or provide a solution perhaps in the future, knowing that you do have this historical element of the company that's provided so many solutions enterprise wide for businesses who have to keep an eye on how secure their infrastructure is?

MALE_1: Yeah. Um, uh, uh, so, we all among everything a lot of stuff, we own a company called [inaudible 00:06:27] , which happened to be the number one cryptology company in the world. And so we embedded sort of the comp technology into chipset, in the software we build, in the cars, in the phones that you have, and in a bar- in a cars that are now being designed and being pushed out. So,um, that's how we usually participate in a cyber se- security world. If you look at the recent announcement with Denso, they are actually using our operating system for safety and security. And that's- that's part of the you know, our value add to the- the market. In addition to that, um, about I think about six months or nine months ago, we started a professional services to help people to certify that their system is indeed safe for threat analysis and remedial steps. So, that is a small unit focusing quite a bit on governance- government space, and we will expand that as time to go on. That that's more of a consulting- consulting side of the equation.

FEMALE_1: All right. John when we see the stock up nine percent today at 58 percent over the past year. So, I think it's fair to say so far so good here with a pivot with the company. John Chen BlackBerry CEO. Thank you again for joining us on the day were earning support.

MALE_1: Thank you. Nice to be here.