Tag: BBRY

Blackberry is going to be an interesting business case as they are clearly not going down without a fight.

They are going to report quarterly results on December 20, 2013. I would expect these results to be very sub-optimal simply because if there was some signs of revenue stabilization it is much more likely that they would have found partners in the proposed buyout at US$9/share. Since there were multiple parties out there that were looking at the internals of Blackberry during October and would have received full visibility in two of three months of the fiscal cycle, I very much believe that revenues will be well below the $1.58 billion consensus estimate that I see on Yahoo at the moment.

In addition, with the new CEO cleaning house at the upper management level, it is going to take at least three to six months for them to realign the company and apply resources to the appropriate strategic priorities the company needs to focus on to get back to a profitable setting. However, the fact that he is cleaning house is a positive signal even though you will not be seeing the results of such actions for at least half a year.

That said, with the expectations in the stock market, I would expect rock bottom to be hit at the end of the year. Not only will they likely produce a lower-than-low expectations quarter, but you will also have the avalanche of tax loss selling and portfolio window dressing – which portfolio manager out there except for Prem Watsa would want to see this dog in their portfolio at year-end?

The sentiment regarding this upcoming quarter is quite bad. The question is how much the market has already baked in an upcoming bad quarter. Have they over-discounted?

DISCLOSURE: A friend of mine who I consider to be quite tech savvy, who already owns a Samsung smartphone with one of those giant screens, recently bought a Blackberry Q10. He suffers from a “can’t type on a touchscreen if it could save my life” syndrome. I share the same syndrome and am actually in the market looking for a usable phone with an actual physical keyboard. Other than that, no positions.

Blackberry pre-announced their quarter today, announcing that their revenue estimates are going to be about half of what analysts were expecting.

Their stock, surprisingly, was only down about 17% in the half hour that traders had to disseminate the information before the market closed. Quite frankly, given that their mass-market handset sales have plummeted to very little, I am surprised that they aren’t trading down further. Part of the reason why they haven’t dropped further is that there is implied value the company can fetch in some sort of liquidation.

Balance sheet-wise, they are still in a relative position of strength – with a couple billion in cash in the bank and no long-term debt. They’re probably going to have to utilize this for severance packages as they are laying off half their workforce.

Strategically speaking, Blackberry is now shifting to its roots in the business end – presumably getting out of the consumer market. It will be interesting to see whether there will be much of a market left for the technology side within organizations.

That said, if the stock gets hammered further, I will be eyeing some for a purchase. It is still slightly away from a point where I will consider a purchase and I would also need to see the actual quarterly results themselves (which will paint a bunch of doom and gloom). There will also be the component of people that will be dumping their stock by the end of the year to book a tax loss, and who wants to have the embarrassment of actually owning Blackberry any time this year? Anybody entering into the stock in 2013 will likely be guaranteed to be sitting on a loss.

On a total side note, if they are writing off their existing inventories of Z10s and other mobile units, I am actually in the market to just do a straight purchase without committing to any length of period for a mobile service contract. Maybe if they are going to do a fire-sale of inventory that I’ll finally pick up a new phone compared to the nearly-broken dinosaur I currently have for a mobile phone. Right now I clearly am not interested in paying $625 for one of them, but if they slash prices by half, I can easily upgrade. I did have a chance to try out the product and they are well designed, despite all of the negative mind-share that Blackberry has today.

Disclosure: No positions.

Microsoft and Nokia announced a deal today where Nokia would functionally sell its mobile phone division to Microsoft and license the related intellectual property for a total cost of about 5 billion Euro.

The implications for Blackberry is that one potential strategic suitor (Microsoft) is probably gone. Just from a systems integration perspective it would take forever to fuse together technology from Nokia and Blackberry to make any sort of merge feasible.

The other data point is that 5 billion Euro gives a valuation benchmark for equivalent technology. Although the analogy is very loose, it does give some benchmark for Blackberry’s valuation – also noting that Nokia’s revenues that are being sold away consisted of about 15 billion Euro a year.

All in all, I am somewhat surprised that Blackberry is trading higher today.

The 145 million shares of Blackberry that were short sold are being rapidly covered over the past few trading days. The worst news they could have is that the company is interested in going private or being bought out, and this is primarily the reason why the stock is experiencing the price spike.

This is a little depressing for people that were looking to go long and have no position as this completely takes the company out of the radar now. When you’ve dumped many hours of research into something and see it go to waste like there, there is a little resentment, but now the research radar will get taken to other directions.