Why Are BlackBerry Ltd. Shares up More Than 10%?

A nice earnings beat is a great sign for BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY).

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BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) shareholders are getting a nice boost to their net wealth, and just in time for Christmas. The company’s stock is up by double digits thanks to its latest quarterly results, which came in much better than expected. We take a closer look below.

A beat across the board

BlackBerry recorded a loss of US$0.03 per share, which was far better than the US$0.15 loss expected by analysts. The company also recorded a beat on the top line, posting US$557 million in revenue and beating estimates of US$489 million.

Both segments performed very well. Hardware revenue beat estimates by US$11 million, while software posted a US$26 million beat. The only area that was a little light was services, but that number has been in decline for years anyways.

The software number is particularly encouraging, and is probably the main factor contributing to BlackBerry’s earnings beat. It signals that the Good Technology acquisition is off to a great start and helps demonstrate that BlackBerry has a future beyond hardware.

A caveat

BlackBerry’s quarterly report is filled with good news, but there is one glaring omission: the number of smartphone sales in the quarter. This was a figure everyone was looking forward to seeing, since it would indicate how well the Priv is selling. The fact that BlackBerry did not release the figure will certainly raise some eyebrows.

That said, I can understand BlackBerry’s coyness. The Priv was not released until early November and only to a limited number of carriers in the United States. So it’s certainly too soon to gauge the phone’s success. Furthermore, the fact that BlackBerry beat estimates on the hardware side does suggest that the Priv is exceeding expectations. Whether the hardware division can break even or not is another matter.

Looking ahead

While this quarter’s numbers are promising, next quarter’s results should draw even more attention for a couple of reasons.

First of all, only then will we know if BlackBerry was able to meet Mr. Chen’s US$500 million software and licensing goal for the current fiscal year. Secondly, we should have a better idea of the Priv’s success–and with that, the future of the hardware division.

Until then, BlackBerry deserves a pat on the back. Nothing more, nothing less.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair has no position in any stocks mentioned.

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