By Alastair Sharp
TORONTO (Reuters) - Canada's BlackBerry Ltd reported a stronger-than-expected quarterly profit on Thursday after sales at its high-margin software unit hit a record, boosting investor confidence in its turnaround strategy and sending its shares up more than 12 percent.
The company also gave a robust revenue outlook for the fiscal year and said it expected a profit for the period before special items.
Software and services revenue rose 26 percent to $196 million in the second quarter ended Aug. 31 from a year earlier, above the average forecast of $175 million of two analysts polled by Reuters. Much of the upside came from licensing.
"Obviously a very good quarter for the software business, which is a good sign for BlackBerry," said Nicholas McQuire, vice president for enterprise research at CCS Insight.
The results bolstered hopes that Chief Executive Officer John Chen was succeeding in rebuilding BlackBerry, whose revenue has declined for seven years due to the collapse of its smartphone business. Chen discontinued smartphone manufacturing and focused on selling software to industrial companies and large corporations.
"There's some exciting growth opportunities," Morningstar analyst Ali Mogharabi said, citing BlackBerry's progress in getting its technology into self-driving cars.
The company said on Sept. 20 that it would partner with auto supplier Delphi Automotive Plc on a software operating system for self-driving cars, sending its shares up 9 percent that day.
Chen told analysts on Thursday that he expected BlackBerry to earn $5 to $25 a car as it expands into more advanced self-driving vehicles. It already is a leading provider of automobile infotainment system software, which he said generates between $1.50 and $5 per vehicle.
Most of BlackBerry's software revenue now comes from managing phone systems for corporations and government entities, but it expects the automotive industry and industrial applications to accelerate growth in the future.
Excluding special items, the Waterloo, Ontario-based company said it expected fiscal-year revenue of $920 million to $950 million, assuming software sales growth of 10 percent to 15 percent. Analysts on average had forecast $924.4 million, according to Thomson Reuters I/B/E/S.
The company reported a quarterly profit of 5 cents a share, excluding special items. Analysts were expecting break-even results.
The company posted net income of $19 million, or 4 cents per share, compared with a year-earlier loss of $372 million, or 71 cents a share.
Total revenue excluding items fell 29 percent to $249 million.
BlackBerry's Canadian-listed shares jumped 12.3 percent to C$12.95, while its U.S.-listed stock gained 12.6 percent to $10.39.