Here's How BlackBerry Can Hit $500M In Software Revenue (And Win Over Investors)

• BlackBerry Ltd BBRY shares are down 17 percent in the last six months, even after inching up through October and November.
• RBC Capital Markets’ Mark Sue maintained a Sector Perform rating on the company, with a price target of $8.
• The Priv launch and the acquisition of Good Technology Corp GDTC mark “the furthest progress’ BlackBerry has made to date in its transition to a software-only business, Sue stated.

BlackBerry launched the Priv in November across several markets, including Canada, US and UK. Media reports indicate that the Priv stocked out in some channels. BlackBerry plans to roll out distribution of the Priv to other geographies over the next several months, “which helps sustain the product cycle,” analyst Mark Sue said.

He noted that 3Q would be the first quarter with a contribution from the Priv, which mean aid a reversal in hardware shipment declines and sequential revenue growth. BlackBerry is expected to record revenue on 900k handsets in 3Q, up from 800k 2Q.

“We’re looking for $98M software revenue 3Q, up from $74M 2Q on the acquisition of Athoc and growth in IP licensing and enterprise software; one month earlier close of the Good acquisition implies another $13M software revenue 3Q,” Sue wrote. The combination of BlackBerry and Good Technology, which the former acquired on November 2, could result in $500M in software revenue in FY16.

Total revenue is estimated to rise 0.5 percent sequentially to $493M in 3Q, marking a slowdown in y/y decline to -38 percent, from -47 percent in 2Q. Backed by lower opex, BlackBerry is expected to deliver an EPS of -$0.11, marking an improvement from -$0.13 recorded in 2Q, Sue mentioned.

The analyst expects BlackBerry to launch its IoT asset tracking solution in early 2016. The company may launch another Android-based device, codenamed Vienna, in 2016.