BlackBerry chief executive John Giamatteo said the Canadian company has begun the process of “right-sizing cost structures” and separating functions to split its Internet of Things (IoT) and cybersecurity businesses into two standalone divisions.
Earlier this month, BlackBerry discarded its initial public offering plans for its IoT wing, but said it still intended to split the IoT and cybersecurity businesses into fully standalone divisions under the corporate umbrella.
“Work has commenced to fully separate and significantly rightsize our businesses, and we expect to further reduce operating cash flow usage in Q4,” said Giamatteo, on a Q3, 2024 conference call with analysts.
By mid-2024 of the calendar year the company expects to complete the separation of the two businesses, “getting into a position where we can have the majority of the functions and capabilities within the two business units up and running and stand-alone. I think that would be a success for us,” he said.
BlackBerry also plans to simplify the corporate structure of the company so that each business unit will operate independently and on a profitable and cash flow-positive basis, he said.
“[We] look at it as two companies on their own, driving their own businesses, and with a kind of a holding company structure that’s there, you know, to support them with — with all the things that they need to drive their business forward.”
BlackBerry aims to get to profitability in each business next year, Giamatteo said. It’s not expecting restructuring costs to be “astronomical,” and within its available resources related to the cyber business.
Giamatteo also said that he “sees ways to streamline” how the company’s back office works, pointing to BlackBerry’s 36 offices worldwide despite cost-cutting. “We have some duplicative teams to illustrate the potential opportunities,” he said.
Q3 Results: Cybersecurity, IoT Strong Growth
For the third quarter 2024, BlackBerry posted a 3.6% increase in revenue year-over-year to $175 million, translating to non-GAAP earnings of $0.01 per share. Analysts expected revenue of roughly $181 million.
BlackBerry’s cybersecurity business revenue grew 8% year over year to $114 million, while IoT revenue rose 8% to $55 million. Giamatteo called it a “good quarter” for the company with “impressive design win momentum.”
BlackBerry said it projects its IoT division will post revenue of $62 million to $66 million in Q4, 2024, which will bring its full year revenue for the wing to $211 million to $215 million. That’s lower than the $225 million to $240 million the company forecast in Q2, 2024 and less than the $240 to $250 million it forecast for the IoT arm this year.
Giamatteo said the company is looking at Q4, 2024 at its IoT business with a “more conservative view” owing to auto labor disputes and the “ongoing slippage of software programs at major automakers” that has pushed back timelines for its technology in vehicles using its software.
Still, he said the company is optimistic about the long-term outlook for the increased adoption of its connected car software in vehicles. “I think it’s fair to say the IoT business is, you know, much in a more stable place. It’s definitely been more of a growth trajectory. So, naturally, we take that into account. You know, we don’t want to disrupt the momentum that we’re seeing on the IoT side at all.”