BlackBerry (BBRY) Earnings Yank the Stock Out of a Rut

The original and formerly-iconic smartphone company may still have a couple of tricks left in its bag.

BlackBerry (BBRY), the Canadian technology company that pioneered the premise of the smartphone with a device of the same name back in 1999 -- well before Apple (AAPL) did it with the iPhone in 2007 -- has been fighting an uphill battle ever since the iPhone came on the scene. Indeed, it's been forced to change its M.O. altogether, shifting itself from a hardware company that also makes a little software to a software company that also licenses a little hardware. Thing is, it may well be working. While BlackBerry posted a GAAP loss for its recently completed fiscal Q4, its operating profit of 4 cents per share was better than the loss of one cent per share the pros were expecting. Meanwhile, revenue of $286 million fell just a bit short of the $288 million analysts were expecting.

On the other hand, although operating earnings were better than expected and better than the loss of 45 cents per share of BBRY reported for the same quarter a year earlier, the top line was miles away from the year-over-year comp of $464 million. That's an unfair comparison though, not reflecting the abdication of its phone business. On a fully-adjusted basis, BlackBerry generated $297 worth of sales, topping adjusted estimates for only $289.3 million.

The numbers support the upside of getting out of the hardware business and focusing more... much more on software. Though software and services is generally a lower-margin business for some tech outfits, for BlackBerry, the money-drain was its phone-making unit. As Chief Executive John Chen said it,  "In the quarter, we continued to grow our mix of software and services revenue across the company. In turn, this allowed us to expand our operating margin and report positive free cash flow."

The specifics: Revenue from software and services totaled $166 million, while from mobility solutions was $82 million. The company reported that 80% of that software revenue is recurring revenue.

For the full year, the company more than met Chen's target of $640 million in software revenue. That arm's sales were up more than 30% in fiscal 2017.

That's still not enough, however, given the company's expenses. While BlackBerry is cutting costs in conjunction with its exit of the hardware business, it's not doing so in a big enough way. It spent 50% of its revenue on selling and administration last quarter, versus only 38% on the same expense in the same quarter of 2016.

Nevertheless, traders saw the glass as half full rather than half empty, pushing BBRY stock up 11% in Friday's early action. The move to $7.71 snapped the stock out of a long-standing wedge pattern, although it's still nowhere near a price that will satisfy the faithful owners who've stuck it out. Even with Friday's strength factored in, BlackBerry shares are still down 26% since the end of 2014, and down 95% from 2008's high... shortly after the iPhone was unveiled.