(Bloomberg) -- BlackBerry Ltd. plunged the most in a year after investors focused on weak growth in software revenues that the company attributed to a change in accounting standards.
Shares in the Waterloo, Ontario-based company fell as much as 10 percent to $10.49 in New York, the most intraday since June 23, 2017. Software revenue, the company’s most important growth metric, was $83 million in the first quarter, 18 percent lower than a year earlier, according to a statement Friday. Analysts at RBC Capital Markets had estimated it would be $106 million.
Software is what BlackBerry is banking on for its future now that it’s not a leading handset maker anymore. Instead, Chief Executive Officer John Chen has worked to establish the company as a serious security software provider in a range of different product lines, such as systems to manage an entire company’s stable of mobile phones, or to let cars securely update their entertainment systems.
Chen said the gulf between expectation and reality in the first quarter results was due to a change in the company’s accounting standards. He said the company would still hit previously set revenue forecasts, including double-digit software revenue growth through this fiscal year, which ends in March 2019.
“The shift to subscriptions from perpetual licenses in BlackBerry’s core enterprise-software business, almost a third of sales, is the major reason its fiscal first-quarter adjusted revenue was down 11.1 percent,” John Butler, a senior analyst with Bloomberg Intelligence, said in a note. BlackBerry went from recognizing big contracts all at once to the subscription model, where clients pay a smaller fee but on an ongoing basis, Butler said.
“They’re going to have to go through a year of tough comps, at least, maybe more,” Butler said in an interview.
The company is on track to transition almost all of its software revenue to subscriptions from the older style licenses, Chen said in an interview.
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