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BlackBerry Sees Cylance Sales ‘Slow’

A possible key customer loss and a revenue projection lower than a prior year have zapped some mojo from Cylance Inc. in the wake of its $1.4 billion sale to BlackBerry Ltd.

The Irvine-based software security maker—co-founded in 2012 by Stuart McClure, a new member of this week’s OC 50—is projected to grow sales at a 25% to 30% clip in fiscal 2020, according to the latest guidance provided by its Canadian parent.

That projection falls short of recent oversized financial gains such as a 94% jump to $133.9 million for the fiscal year ended April 2018.

The 94% jump was an “abnormality because of a virus,” BlackBerry Chief Executive John Chen told analysts in March after the company’s fourth-quarter earnings. He also said “the math of small numbers versus bigger numbers” makes it look worse than it actually is.

A 30% annual sales increase is still healthy on Wall Street and BlackBerry shares are up almost 10% to $9.18 since the Feb. 21 acquisition. Chen said Cylance will be “a very high growth company.”

Cylance “is off to a bright start and we’re very pleased with this acquisition,” Chen said. “It is a positive validation on our investment thesis.”

The Irvine operations, now known as BlackBerry Cylance, remains headed by McClure.

Cylance products are used to protect more than 15 million internet-capable computer hardware devices for more than 3,500 corporate subscribers, including Gap Inc. and Panasonic Corp.

It uses artificial intelligence algorithms to thwart new and evolving threats and cyberattacks before they hit servers, desktops and virtual desktops. It ranked as OC’s fifth-largest software company by employee count last year, with 382 locally and 840 companywide.

Cylance declined to comment for this article.

Endpoint Moves

One company that may have reduced its reliance on Cylance’s products may be Dell, which in 2015 invested in Cylance’s $42 million Series C round led by DFJ Growth in Menlo Park.

Dell, which had contracted with Cylance to enhance its endpoint security enterprise product, in January announced that it was shifting its endpoint security strategy to a combination of SecureWorks Inc. and CrowdStrike Inc., the latter of which moved its headquarters from Irvine to Silicon Valley in 2017.

Dell was possibly Cylance’s largest customer, accounting for at least 14% of its total revenue in fiscal 2018, or roughly $19 million, according to Seeking Alpha blogger Paulo Santos, who has been trading professionally for 20 years.

“This development is likely the reason for such ‘low’ guidance’ from parent company BlackBerry,” according to Santos, who has 17,300 followers on Seeking Alpha.

Still, with a possible 30% increase in annual sales, it may turn out that Cylance is “the growth story” for BlackBerry, he wrote.

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