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BlackBerry is transforming from a struggling smartphone company into an emerging leader in cybersecurity software and connected cars.
The company currently generates more than 90% of its total revenue from software and services. 81% of these sales are recurring. In other words, BlackBerry is no longer beholden to the whims of consumer tastes, but is riding the coattails of enterprise customers.
blackberries (BB) Its latest quarterly profit and sales, reported Friday morning, beat Wall Street forecasts. The stock rose more than 15% in early trading on the news.
CEO John Chen told CNN in an interview on Friday that the company’s biggest success this quarter was in the connected and autonomous vehicle market, with business unit revenue including the QNX automotive software business growing by about 30%.
Chen said BlackBerry is working to win more customers in the automotive market, pointing to a deal the company announced in January with a Chinese search engine giant Baidu (Baidu) jointly develop self-driving cars.
A few years ago, the company under Chen realized that making devices with razor-thin margins was a losing battle. apple (AAPL) and Samsung (SSNLF) Dominate the smartphone race.
That’s why BlackBerry decided in 2016 to stop producing its own phones and outsource the production of devices bearing the BlackBerry name to other manufacturers.
Since then, BlackBerry has gone all-in on software.
BlackBerry wants to launch new ‘Spark’
What’s next? Chen said he hopes BlackBerry’s new Spark security platform, which is somewhat like an instant messaging tool, can capture a larger share of the healthcare market. Spark integrates video chat, text and other forms of media.
BlackBerry is targeting health to help the company expand beyond its core markets of transportation, government and financial services companies.
Investors are also pleased with the shift. BlackBerry shares have risen more than 60% since Chen took over nearly five years ago. That’s solid, but it lags the performance of Apple and the Nasdaq.
Still, Chen cleaned up BlackBerry’s balance sheet. The company currently has $2.4 billion in cash and only $740 million in long-term debt. Rumors about BlackBerry’s imminent demise are no longer as rampant as they were before Chen joined.
BlackBerry’s board of directors is also pleased with Chen’s leadership. BlackBerry announced in March it was extending Chen’s contract until November 2023.
It might also put to rest some rumors that Chen would only stick around long enough to sell BlackBerry to a larger rival.
CNN Business (New York) First published September 28, 2018: 10:41am ET