What's going on?

BlackBerry�s long promised recovery stumbled on Friday after the company reported a big drop in revenue during the second quarter of 2017 (versus a year ago). Shares in the company plunged by nearly 11%! (tweet this)

What does this mean?

BlackBerry, once a world leader in smartphones, has completely changed its strategy in the four years since its newest CEO took over the company. After failing to successfully market phones that could seriously compete with Apple�s iPhone, the company opted to shed its mobile phone division and turn itself into a software company, anchored in cybersecurity and self-driving cars (although it still licenses the brand to other manufacturers). On Friday, however, that turnaround appeared to be further away than investors had thought after BlackBerry reported lower-than-expected sales from its software division.

Why should I care?

For markets: BlackBerry�s stock was having a great year, but investors got a little ahead of themselves.

Before it reported earnings on Friday, BlackBerry�s stock had risen by 62% since the beginning of the year. The stock was particularly buoyed by an $815 million payout to the company from Qualcomm, one of its business partners, following the settlement of a legal dispute over royalties between the two companies. But with revenues from its key software business not growing as quickly as expected, investors� optimism seems to have soured somewhat.

The bigger picture: BlackBerry has turned itself around by slimming down � often a good strategy for unprofitable companies.

In the same quarter a year ago, BlackBerry lost $670 million. This year, the company turned a small profit (even excluding the big payment from Qualcomm)! It achieved this largely by shedding old, unprofitable businesses � like making phones � and focusing on its growing software business, where BlackBerry feels it has a competitive advantage. It�s a long way from a total turnaround (as Friday�s results show), but there are at least some reasons to be optimistic.