'All Eyes' On BlackBerry Next Week

BlackBerry Ltd (NASDAQ: BBRY) could dump its operating system in favor of Android-based devices, even as it increasingly emphasizes software sales, an analyst said Thursday.

RBC Capital's Mark Sue said an Android-based device might now be in the works at BlackBerry, in a "first step" toward jettisoning the sizable fixed costs of maintaining its own operating system.

Resulting devices might amount to a "customized security-focused" version of Android running on BlackBerry hardware, according to Sue, who maintained a Sector Perform rating on the company.

Focus On Earnings

But Sue, along with other analysts, will be more immediately focused on BlackBerry's recent software sales when it posts first-quarter results on June 23.

Analysts on average expect a loss of $0.03 a share on total revenue of $698 million.

Sue said the possible Android device and recent restructuring "point to the rising shift to software."

Related Link: Many Questions Remain At BlackBerry, Morgan Stanley Says; Remains Bearish

The company aims to see software sales for the current year of $600 million.

But Sue called that outlook "back-end loaded" and expects first-quarter sales in the category to be sequentially flat at about $70 million.

Other Analysts

BMO's Tim Long called the $600 million goal "ambitious" and said Blackberry will need to post at least $84 million in first-quarter software revenue to show "a solid trajectory" toward the aimed-for number.

Hitting the software goal "remains in question," said Morgan Stanley's James Faucette, who added that uninspiring success with new device sales might indicate troubles across the board.

Faucette, who maintains an Underweight rating and $7 target on BlackBerry, expects device sales fell slightly, sequentially to about 1 million units in the first quarter.

A Morgan Stanley survey suggests that corporations plan to scale back BlackBerry purchases in favor of BlackBerry's competitors, according to Faucette.

ScotiaBank's John MaGee is somewhat more positive, and expects positive trends to emerge in the second quarter.

"We continue to recommend that long-term investors take a look at the name" said MaGee, who maintained a Sector Perform rating on BlackBerry.

BlackBerry shares are off about 17 percent year-to-date and traded recently at $9.16, down $0.15.