Blackberry earnings preview: What to expect

BlackBerry Chief Executive John Chen introduces the Passport smartphone during an official launch event in Toronto on Sept. 24, 2014.
Aaron Harris | Reuters

Investors are gearing up for the latest earnings results of a once-mighty company: Blackberry.

The Toronto-based company's stock has fallen dramatically since closing at an all-time high of $145.76 in 2008, but it has managed to stick around because of its stronghold on the enterprise tech space and by acquiring smaller competitors, most recently software provider Good Technology.

"The big focus on the Street has been around the Good Technology acquisition and where they are taking it," said Dan Ives, technology analyst at FBR Capital Markets.

Blackberry agreed to buy the software provider for $425 million on Sept. 4 in an effort to bolster its enterprise business, but it also shifts the company's focus into mobile cybersecurity and could have ramifications for the entire tech industry, Ives added.

"The Good acquisition puts them in a more high-growth market," he said.

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Blackberry is scheduled to release second-quarter earnings results Friday before the bell, with analysts expecting the company to post a loss of 9 cents per share on revenue of $611 million, according to a Thomson Reuters consensus estimate. The company posted a loss of 2 cents a share on revenue of $916 million on last year's second quarter.

Still, Morgan Stanley reiterated its caution on the mobile security space on Tuesday, "which is likely seeing substantial pricing pressure as AirWatch and Microsoft offer bundled enterprise software solutions and customers demand productivity features beyond 'lock-it-down' device management."

Canaccord Genuity also said in a Sunday note that they are "concerned with BlackBerry's ability to achieve synergies necessary just to offset the Good's level of net losses, let alone drive stronger combined earnings."

Blackberry may face an even greater challenge from the world's No. 1 company in the world in terms of market capitalization: Apple.

"If you think about the enterprise market, which Blackberry has had an iron fence around it, it has become a question of whether or not it's under threat because of the Apple-Cisco partnership," Ives said.

On Aug. 31, Apple announced a partnership with Cisco Systems to improve iPhone and iPad performance on Cisco's corporate network. Last year, Apple partnered with IBM to sell iPhones and iPads preloaded with applications aimed at enterprise clients.

"Blackberry … and a lot of the traditional tech companies are in a horse and carriage in the right lane while Apple and other 'next-gen' tech companies are running by them in their Ferraris," Ives added.

Blackberry has also tried to stay afloat by selling some of its licenses but investors should not expect any surprises from these deals, said Mike Walkley, technology analyst at Canaccord Genuity.

In a note, Canaccord said that "the lack of visibility for the cadence of these deals leads us to assume potential future deals will be lumpy in nature and we are not anticipating new deals during the August quarter."

Walkley added that the firm expects smartphone sales, once Blackberry's catalyst to market dominance, would continue to weigh on the company's performance.

"We've talked to several store managers … and their phones are not selling well," he said.

Blackberry released its most recent models, the Classic and Passport, last year and rumors about a new phone running the Android operating system being released in the near future continue. Nevertheless, Walkley said it would do very little to move the needle for the company.

—Reuters contributed to this report.

DISCLOSURES: FBR Capital Markets makes a market for Apple. Blackberry is an investment banking client of Canaccord Genuity and Morgan Stanley.