Underperforming Cylance affected Blackberry

Blackberry took a hammering due to its poorly performing software services arm Cylance according to GlobalData

The company declineed 16 percent in Q1 2020, compared to Q4 2019, due to revenue and gross margin drops in its struggling software services segment, the revenues of which declined by around 12 percent.

Cylance, a part of the software services segment, remained subdued throughout the period, even as cybersecurity demand surged due to increasing work-from-home policies during the pandemic, says GlobalData, a leading data and analytics company.

GlobalData Senior Analyst Rinaldo Pereira said: “Blackberry’s decline comes as a surprise, as endpoint security competitors such as Crowdstrike have shown revenue growth of 85 percent in Q1 2020. Furthermore, despite reducing Q1 2020 estimates in February 2020, Blackberry was unable to match its expectations.”

Pereira added: “According to Blackberry, headwinds in the automotive and embedded systems businesses caused a decline in revenues. However, Cylance’s year-on-year quarterly revenue slump (around  four percent) also played a significant role in the company’s sentimental drop.”

Under Cylance, now referred to as the Spark platform, Blackberry faced goodwill impairment charges of US$594 million during Q1 2020. Nevertheless, Blackberry seems optimistic and expects double-digit growth post the pandemic situation. However, the cybersecurity firm did not issue any guidance in contrast to its counterpart Crowdstrike, which raised its full-year expectations.

Pereira concluded: “Blackberry has moved on from phone manufacturing to focus on software solutions. In 2019, Cylance was expected to be a key part of its future cybersecurity gains. However, its 2020 (to May) performance has been substandard. With work-from-home policies likely to continue until the end of 2020, it will be fascinating if Blackberry gains ground and improves Cylance’s performance, as the management has commented on improving margins.”