Why Are BlackBerry Shares Headed Higher Today? - TheStreet

Today marks the end of an era for BlackBerry (BBRY) as the Canada-based tech company announces it will stop producing smartphones.

BlackBerry was a true smartphone pioneer. Way back in 1996, when BlackBerry was known as Research In Motion, the company brought out its first two-way pager. After commercial success and a lucrative deal with IBM, the company adapted its pager device to give users the ability to read their emails in 1999. This was the beginning of the smart device revolution. And investors have made their fortunes on this revolution.

But then Apple released its first iPhone in 2007, followed by Alphabet's Android platform in 2008, and it was the beginning of the end for BlackBerry. During the most recent quarter, the company sold about 4 million smartphones. By comparison, Apple sold 40 million.

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The company has lost more than 95% of its value from its all-time highs around $139 per share back in 2009.

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Last year, BlackBerry CEO John Chen announced that the company would stop developing and manufacturing smartphone hardware if BlackBerry couldn't find a way to make this business profitable.

It appears that that day has come.

On Wednesday, following the company's BBRY data by YCharts second-quarter earnings release, Chen said, "The company plans to end all internal hardware development and will outsource that function to partners. This allows us to reduce capital requirements and enhance return on invested capital."

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Simply put, the earnings announced this morning were dismal. For the second quarter, the company reported a net loss of $372 million. Shares of BlackBerry are surging upward Wednesday and recently were up more than 5%.

That's because Chen also announced that the company will be shifting gears, moving further into the lucrative software industry. And investors are applauding that decision.

"We are reaching an inflection point with our strategy," he remarked. "Our financial foundation is strong, and our pivot to software is taking hold. In [the second quarter], we more than doubled our software revenue year over year and delivered the highest gross margin in the company's history."

Chen should have a good idea of how to lead the software initiative. After all, his previous post before BlackBerry was as an executive at Sybase, a subsidiary of software giant SAP.

By expanding its business in the cloud computing and software-as-a-service market, BlackBerry will be going head-to-head with other software developers such as Oracle and Salesforce.

And the company has just landed its first customer for its brand-new trucking software. BlackBerry Radar lets transportation companies track information about their trucking fleets.

Caravan Transport Group, based in Ontario, Canada, will be the first company to use the software, having installed it on 500 trailers already, with plans to roll it out across as many 1,500 units.

These are the sorts of deals -- not sales of consumer smartphones -- that could make BlackBerry's fortunemoving forward. And investors still stand to profit from BlackBerry in the long term. With share prices a far, far way from their three-digit heyday, currently below $9 per share, BlackBerry makes an intriguing bet on the cloud and software solutions.

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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.