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BlackBerry Ltd. Earnings Preview: What to Expect

Investors looking forward to BlackBerry Ltd.’s (TSX:BB)(NYSE:BB) Q3 earnings report next week have a lot to digest in the trading sessions to come, given the relative roller-coaster ride investors have been on since the beginning of the year.

Following a material win in May of $940 million in a final ruling, putting to rest an ongoing dispute with Qualcomm Inc., BlackBerry’s balance sheet has been nicely lined with cash this year, allowing the tech company some breathing room in its bid to reinvent the company’s underlying operations. While some of this gain has been offset by a subsequent loss of $140 million in a patent dispute with Nokia, the net gain of approximately $800 million is meaningful for BlackBerry, given its need for capital and reinvestment in its long-term strategy.

Whether/how this $800 million will be put to use, and/or details on how the company’s management team has planned to spend this money are the questions investors will hope for some clarity on next Wednesday.

CEO John Chen’s turnaround has begun to take hold with some investors, with software revenues increasing each and every quarter, becoming a higher overall percentage of BlackBerry’s revenue pool (a revenue pool which has been shrinking). Investors will be paying close attention to BlackBerry’s top-line numbers; specifically, investors will want to know if revenues have finally started to tick upward, what percentage of said revenues will come from software as opposed to legacy hardware/licensing revenues, and how much of an impact the company’s QNX and autonomous vehicle segment will have on BlackBerry’s bottom line.

Each quarter, BlackBerry has seen its revenue mix adjust substantially toward software revenue; should the company breach the 85% or 90% level (software revenue as a percentage of total), investors are likely to be pleased.

Bottom line

As a cautious investor, and having followed BlackBerry for years, I remain skeptical as to the ability of BlackBerry to hit this earnings session out of the park. Based on recent quarterly wins which have relied on one-off items, and an apparent lack of tangible traction relating to the company’s QNX and autonomous vehicle segment, I am not bullish on the near-term prospects of BlackBerry following the company’s earnings report (for all you traders out there).

That said, for all you long-term value investors, I do believe BlackBerry holds value at its current level due to the dry powder the company was awarded in its Qualcomm patent victory and the long-term vision of Mr. Chen, which appears to be playing out well.

Stay Foolish, my friends.

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Fool contributor Chris MacDonald has no position in any stocks mentioned in this article. Tom Gardner owns shares of Qualcomm. The Motley Fool owns shares of Blackberry and Qualcomm.

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