BlackBerry Ltd (BBRY) Finds Life After Smartphones

What is BlackBerry Ltd (ticker: BBRY)? This was an easy question around the turn of the decade when BlackBerry was a leader in smartphone operating system market share.

This was an easy question even when the Apple ( AAPL) iPhone started to eat that share, but BlackBerry still stood out as the businessman's smartphone. Heck, this was even easy to answer for the past few years as BBRY clearly was a falling star, seeming destined to evaporate from the smartphone market altogether.

And that happened. BlackBerry has virtually disappeared from the smartphone arena, with market share low enough to be considered "zero percent," but BlackBerry itself hasn't disappeared, and BBRY stock hasn't plunged to zero. Instead, the Canadian tech company is taking investors on a nauseating ride of corporate rediscovery.

That journey reaches its next crossroads on Friday before the bell, when it reports its fiscal fourth-quarter earnings.

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The headline numbers: Wall Street is expecting very little from BlackBerry, at least on the top line. Revenues are expected to plunge 37.8 percent year-over-year to $288.45 million. From a profit perspective, analysts see BlackBerry posting a breakeven quarter -- though that would be up from a 3-cent-per-share loss in the fourth quarter a year ago.

To get an idea of just how far BBRY has fallen from grace, consider that five years ago -- for its fiscal fourth quarter of 2012 -- BlackBerry, then called Research in Motion, reported adjusted earnings of 80 cents per share on revenues of $4.2 billion. (And that itself was a 19 percent drop in sales.)

The many faces of BBRY. This quarter's estimates illustrate one of many shifts in BlackBerry's identity and how the business is run. BlackBerry has stopped producing phones, and instead licenses out its brand to companies like China's TCL Corp. As a result, it only records revenues from the licensing agreement, which aren't as robust as the unit sales it used to post. On the flip side, because BlackBerry isn't physically building the phones, its costs are lower, so it squeezes out more income from every dollar of revenue.

This isn't a short-term problem for BlackBerry, either. Not only does Wall Street predict a 37 percent drop in revenues, but analysts also think the fiscal year ahead will see another 28 percent drop in sales. Revenue growth of any kind could be absent until 2019.

There are areas of promise, but not much concrete.

For instance, BlackBerry is using its QNX operating system to infiltrate the car of tomorrow, powering systems in Audi, General Motors Co. ( GM) and Ford Motor Co. ( F) vehicles. As of the most recent data, QNX was in nearly 60 million vehicles worldwide. However, infotainment systems are a low-revenue market, capping the potential there. While BlackBerry is also aggressively pushing QNX into the self-driving car market, it also faces well-heeled competition there.

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BlackBerry also offers security solutions, but cybersecurity is another competitive and fragmented market. IBM CFO Martin Schroeter said last year, "On average today, organizations use 80 security products from 40 different vendors." You also need only look at Fortinet ( FTNT) and Palo Alto Networks ( PANW) over the past couple of years to see the inherent difficulties the industry is facing.

The bright side. For all the negativity, there are a few glimmers of hope. For one, CEO and turnaround maestro John Chen raised the company's profit outlook for the current fiscal year after third-quarter earnings, expecting to achieve non-GAAP profitability. Most notably, "This is the third consecutive quarter we have increased our EPS outlook, reflecting the traction we are achieving in our shift to a software business model."

And if BlackBerry can survive the hemorrhaging in revenues and put a cap on its cash burn, it suddenly finds itself in a much more navigable situation.

Macquarie's Gus Papageorgiou laid out a picture of the promised land in a September 2016 note: "By 2019 BlackBerry will have effectively shed any legacy of its previous business model. Any revenue from hardware will be from licensing deals which we expect to be small but highly profitable, and the service revenue stream will likely be completely exhausted. What will likely remain is a high margin software business that should generate good profits."

It's just a matter of waiting. But the longer BlackBerry persists, expect investors to be more and more aggressive about driving shares higher after quarterly beats.

More earnings in focus

Carnival Corp. (CCL). Cruise line operators have been an unsung winner following the 2016 presidential elections, though CCL is the laggard of the bunch, up 22 percent compared to 31 percent for Royal Caribbean Cruises ( RCL) and 36 percent for Norwegian Cruise Line Holdings ( NCLH). Analysts are getting increasingly bullish on the company as it nears its Tuesday report, including three earnings revisions higher in the past month. Considering estimates are still lukewarm at 3.5 percent sales growth to $3.78 billion, and a 10 percent dip in earnings to 35 cents per share, it's possible CCL could have a significant beat on deck.

Lululemon Athletica (LULU). Lululemon shares have spent most of 2017 cooling off since their December 2016 post-earnings pop, sparked by a 32 percent year-over-year improvement in profits. This time around the earnings carousel, Wall Street will be expecting 19 percent profit growth to $1.01 per share on an 11.3 percent spike in the top line to $783.7 million.

This Week's Earnings Calendar

Monday. Red Hat ( RHT)

Tuesday. McCormick & Co. ( MKC), Dave & Buster's Entertainment ( PLAY), Sonic Corp. ( SONC)

Wednesday. Hain Celestial Group ( HAIN), Paychex ( PAYX)

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Thursday. Science Applications International Corp. ( SAIC)

Kyle Woodley is managing editor of InvestorPlace.com. He specializes in (and prefers investing in) exchange-traded funds. In addition to InvestorPlace and U.S. News & World Report, his work has appeared on MSN, Nasdaq and Yahoo Finance. Investing is his second love, with Ohio sports teams as his first. Naturally, this has warped his general perception of love, sparking (among other things) an unnatural affection for the Haddaway hit, "What Is Love?" Follow him on Twitter.