BlackBerry expands partnership with LG Electronics as it reports Q1 results

TORONTO—BlackBerry Ltd. and LG Electronics Inc. are expanding a partnership that they hope will give them a bigger role as technology suppliers to the world’s auto manufacturers.

Under the agreement announced Wednesday shortly after BlackBerry released its latest quarterly results, the South Korean electronics company said it will embed BlackBerry QNX software into a wide range of components.

The technology will be used in infotainment systems, digital instrument clusters and telematics systems for internet-connected vehicles—one of the markets that BlackBerry sees as ripe for long-term revenue growth.

BlackBerry’s QNX technology is in more than 150 million cars worldwide—up 30 million or 25% from last year, according to research firm Strategy Analytics.

BlackBerry executive chairman John Chen told reporters Wednesday that LG is winning a lot of business with vehicle makers.

“But more importantly, LG has agreed to use almost all of our components where applicable. . . . and then we have a much bigger ARPU, which is average revenue per user or per car.”

“So it expands the dollar value of what we offer and it also goes wider.”

One of LG’s partners is European automaker Peugeot. BlackBerry’s biggest automaker partner is Ford but it also has agreements with Audi, BMW, General Motors, Honda, Hyundai, Jaguar Land Rover, KIA, Maserati, Mercedes-Benz, Porsche, Toyota and Volkswagen.

BlackBerry, which made its name as a smartphone maker, but has evolved into a software and services business, reported Wednesday that it took in US$247 million in revenue in the three months ended May 31, up from US$213 million in the same quarter last year.

The improvement came as it reported a first-quarter net loss of US$35 million or nine cents per diluted share, compared with a year-earlier loss of US$60 million or 11 cents per diluted share.

On an adjusted basis, BlackBerry reported a profit of a penny per diluted share and revenue of US$267 million, up 23 per cent from a year ago.

Analysts had estimated BlackBerry would have one cent per share of adjusted earnings with US$265 million of revenue, according to Thomson Reuters Eikon.

It was the first BlackBerry financial report to include a full quarter of contributions from Cylance, a California-based artificial intelligence and cybersecurity company, which was acquired in February for US$1.4 billion.

Cylance contributed $32 million of revenue under U.S. generally accepted accounting principles, or $51 million on a non-GAAP basis—up 31% from the same time last year.

Related: BlackBerry to buy cybersecurity company Cylance for US$1.4B [Canadian Manufacturing]

“I’m pleased to report that our integration of BlackBerry Cylance is ahead of schedule,” Chen told analysts in a conference call. “The teams work extremely well together.”

The one area where there’s been a bit of technological lag, he said, is the integration of Cylance artificial intelligence technology with QNX software due to the amount of work being done on integrating other products.

He said sales from BlackBerry Cylance are also ramping up slowly, as anticipated, because the two companies have had different markets and it will take time to bring their integrated suite of products to new customers.

“BlackBerry is a mobile-first company. . . Cylance is more focused on PCs and routers and servers and fixed assets.”

Once the two product roadmaps are aligned to provide security from end-to-end—mobile to computer—there will be an upturn in revenue, he said.