On December 19, BlackBerry reported that sales from its software and services division jumped to US$190 million, breaking the record it set in the previous quarter and beating analysts’ consensus estimate.
This robust performance during the past two quarters from the company’s flagship software and services business was a vindication that the company was well on track to reverse its fortunes after its smartphone business shut down amid the fierce competition and the company’s failure to innovate.
“Our strategy is working and our execution is yielding results,” said John Chen CEO in a statement. “We are a market leader in secure endpoint management and embedded software. The validation we have received, from partners, customers and industry experts around the world, speaks for itself.”
Re-branded as a cybersecurity software and services company dedicated to securing the enterprise of things, BlackBerry won many valuable clients during the quarter, including NATO, the U.S. Department of Justice, U.S. Department of Defense, the Dutch Government, and Deutsche Bank.
Reacting to this positive development, investors sent BlackBerry stock soaring 12%, adding to 69% gains for the year.
Though BlackBerry reported a US$275 million loss in the quarter, investors only focused on the positive news. Revenue also fell to US$226 million in the three months ended November 30, down 22% in the same period last year.
Despite the loss, the company posted a gross margin of 74%, also beating the record set last quarter.
BlackBerry momentum continues
The third-quarter earnings data confirms my earlier forecast that the company is well positioned to benefit from a spending spree by the major organizations and global corporations on its network security after high-profile breaches in 2017.
The QNX operating system, which powers automobiles’ infotainment systems, won 10 automotive supplier contracts in the quarter. The security of the operating systems of self-driving cars is a great selling point for auto manufacturers in this space, and that’s where BlackBerry is showing strength of its products.
Trading at $15.59 a share at the time of writing, BlackBerry shares still offer a lot of value for investors who believe in this turnaround story.
BlackBerry is a great contrarian bet for 2018, despite the company’s dismal past. The latest numbers boost this argument.
It's not Apple. Or Google. Verizon or AT&T. In fact, you've probably never even heard this company's name. Yet it's so vital to the "smartphone" revolution that its shares have doubled time and time again since they first hit the shelves. And if industry insiders are right, the rapidly escalating war between iPhone and Android is about to push this stock even higher.
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Fool contributor Haris Anwar has no position in any stocks mentioned. The Motley Fool owns shares of BlackBerry. BlackBerry is a recommendation of Stock Advisor Canada.