BlackBerry Ltd.’s Irvine-based Cylance division shines bright in the parent company’s latest earnings report.
Canada’s BlackBerry announced on June 26 that cybersecurity firm Cylance brought in $51 million in first-quarter revenue on a non-GAAP basis—almost a fifth of the company’s total.
That is a 31% increase for the Orange County-run division, whose artificial intelligence-driven software is used to protect more than 15 million internet-capable computer hardware devices for more than 3,500 corporate subscribers.
“From my perspective, Cylance was a bright spot on BlackBerry’s earnings report,” D.A. Davidson Senior Research Analyst Rishi Jaluria told the Business Journal. “It seems the integration is going well and Cylance is growing nicely and an important part of BlackBerry’s pivot to more software and services.”
The Cylance revenue increase was driven by an approximately 30% year-over-year rise in the number of new active subscription customers.
The new customer growth in the quarter was broad-based across various industries led by professional services sector, manufacturing, as well as government.
“I am pleased to report that our integration of BlackBerry Cylance is ahead of schedule,” BlackBerry Chief Executive John Chen said in a conference call after the earnings were released. “These activities result in revenue growth and help us in profitability in the first quarter of fiscal 2020.”
Good Value
BlackBerry snatched up Cylance early this year for $1.4 billion, in a deal that pales in comparison to the $12.8 billion market cap for fellow cyber-watchdog CrowdStrike Holdings Inc. of Sunnyvale, which went public on June 12.
Chen said the BlackBerry Cylance numbers show the deal is “great news” for BlackBerry when compared to the share price-to-revenue range for CrowdStrike, which got its start in Irvine in 2011.
Cylance’s annual growth is expected to be in the range of a robust 25% to 30%, according to Chen. He also said the research and development team is on track to integrate the Cylance technology into BlackBerry technology.
Chen said the three new products that BlackBerry Cylance announced earlier this year “are on track to be released throughout our fiscal year.”
Still, BlackBerry shares fell after the earnings report that said sales from its software and services unit were below analyst expectations, while the Cylance acquisition contributed less than some analysts had expected.
There is great uncertainty in the crowded cybersecurity field.
Sam McBride, an investment analyst at New Constructs LLC in Nashville, told the Business Journal last month that markets view cybersecurity as a “winner-take-all” tech sector.
He said CrowdStrike may have the best technology and that helps to reinforce the company’s position.
“The more data you get the more you can improve the product,” he said last month after the CrowdStrike IPO.
As a result, McBride said Cylance may be in a losing position that is hard to come back from.
