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Blackberry Ltd: Down But Not Out
Posted by: arti7 (IP Logged)
Date: December 31, 2013 04:44PM

Blackberry Ltd. (BBRY) is a technology stock that may have almost bitten the dust, but is definitely not out of reckoning, simply because of the secure and high-quality services it brings to enterprise users.

Given time, and John Chen continuing at the helm, the turnaround should be around quicker than expected. The recent third quarter reports announcements led to Chen along with his Blackberry colleagues holding discussions with analysts, which revealed more than the financial discussions – new confidence – in how the company can achieve its earlier market leadership!

Will Blackberry See a Turn Around?

On the question of BlackBerry hoisting a turnaround, there is a resounding YES, from financial analysts, read market sentiment and skeptics alike! In many ways the unanimous positivity is first largely based on the unique strengths and strongly secured platform features that BlackBerry has successfully developed thus far and second, the exclusivity it, once upon a time, brought to its products a la Steve Job’s Apple Inc. and iOS devices.

However, hurdles will persist and BlackBerry will have to scale these to crest again.

Hurdles Ahead for Blackberry

Not long ago, Research In Motion, the original name under which BlackBerry debuted as a service and product, set the standards for the smartphone industry. Its secure data communication, driven by proprietary software, BlackBerry Messenger, had established it as the Enterprise User’s style-cum-functional statement. Employees of a company could communicate on RIM’s BlackBerry secure communication services without fear of privacy compromise. It was only later that iPhones could even begin to match the services BlackBerry delivered.

For a start, the brand name itself is now viewed negatively. The technology that BlackBerry currently delivers is ridden with security loopholes. The blackouts in Europe and other regions in the years past are not forgotten yet, and so is the ineffectiveness of the latest operating system revisions. The expectation was that BlackBerry 10 would deliver some relief; however, that version too proved to be an ignominy.

First, BlackBerry will have to rework its name, strengthen features it offers on its products, develop more powerful software and operating systems, which will once again, bring back the users it lost. It needs to build quality vs. quantity and achieve on-par features if not get ahead of what the competition offers.

Rebuild Reputation on Enterprise Platform

As John Chen has repeatedly stated on forums and platforms where he presents his BlackBerry case, the market continues to view his company as a "secure enterprise solutions provider. The direction BlackBerry is heading is very clear.

BlackBerry has already chosen its new hardware partner, Foxconn, a Chinese phone-assembling and manufacturing facility which also executes outsourced production for Apple Inc. Chen expects to see prices come down on the limited number of smartphones it expects to design and debut in the coming two to three quarters.

Additionally, with the iconic BlackBerry Messenger now available for non-BlackBerry devices such as iOS and Android, it has meant that the number of users has grown to 40 million and more. BlackBerry intends to monetize this user base to turn in higher revenues and earnings.

Emerging markets is where BlackBerry will see its coffers swell, and it is well on its way to match the demand by closing deals with several OEMs, mostly low-cost Android phone makers, including LG, which will launch with Blackberry 10 pre-installed. Besides, it will also launch the first Foxconn-made BB10 3G device in March/April 2014.



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Re Blackberry Ltd Down But Not Out
Posted by: SeaBud (IP Logged)
Date: December 31, 2013 05:10PM

Some on here were playing the $9 arbitrage with Blackberry after Prem Watsa said he would buy it (stock at about $8.50 then).  I cautioned then that I believed said arbitrage had greater risk than might appear because BBRY has no moat and is in a consumer driven, capital intensive business that is devastatingly cyclical. BBRY's desperation became clear in low sales and huge losses.  Further, I believe the enterprise security you see in BBRY has largely been equalled by Apple and the Windows phones are not far behind.  I am impressed with Chen and think outsourcing manufacturing may give them room to breath. However, I also see huge losses and a scramble to hold their niche of market, with cash being spent during that time. I also see no valuation based upon sale of asset parts or the company as a whole, which will be necessary if they cannot turn around consumer preference for their product. This has no margin of safety, huge downside risk and no clear path to success (yet), IMHO. I would not buy until I see stabilization or traction in the market, which may come in the form of messenger being exported to other platforms but monetization of this is as yet unproven.


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Re Blackberry Ltd Down But Not Out
Posted by: sam.sivaskandan@facebook (IP Logged)
Date: January 1, 2014 09:38AM

Well stated by SeaBud. Additionally, there are so many better companies to choose from that are much less risky. 


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Re Blackberry Ltd Down But Not Out
Posted by: AlbertaSunwapta (IP Logged)
Date: January 1, 2014 05:01PM

I just think it's too far gone to make any kind of logical decision on buying it.  If the secure network was  seen by competitors as so valuable, I'd have guessed that one of them would have bid for the whole company by now out of fear that a competitor would beat them to it.  A buy out would have been pocket change for a big player so I imagine that they feel the market just doesn't value that high level of security.  Note the incredible number security issues with Android, yet it continues to rapidly expand its market.

We we have to keep in mind that this is the computer world we are taking about where price has repeatedly trumped quality for decades. Apple suffered when lower cost (front end cost), poor quality PCs and operating systems nearly put Apple out of business.  



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Re Blackberry Ltd Down But Not Out
Posted by: gurufocus (IP Logged)
Date: January 1, 2014 10:00PM

Good article!

Thanks!



Stocks Discussed: BBRY,
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Re Blackberry Ltd Down But Not Out
Posted by: kfh227 (IP Logged)
Date: January 2, 2014 09:21AM

Source for this please:

 and it is well on its way to match the demand by closing deals with several OEMs, mostly low-cost Android phone makers, including LG, which will launch with Blackberry 10 pre-installed.

 

 

I have the latest leaked OS for the Z10.  I love it.  I can not stand touching Android and iOS phones.  Using one of these after only several weeks on my Z10 showed me how outdated iOS and Android are.  BB10 is built around communication.  It does it better than the rest.  If e-mail, Facebook, text mesaging, phone calls, etc are what you care about, BB10 is the OS and Blackberry is the phone.  If you care about games (I doubt many 50 year old iPhone users are in this group), then BB10 is not for you.

 

Blackberry's future is a crap shoot.  I have no idea if Chen's statement to turn things around in 5 quarters will work.  I think it will get close though.  People in teh USA keep forgetting that they are the 5%.  5% of the world population.  And the common excuse I hear is that people in other countries follow what we do.  This view may have been true 10-20 years ago, but they don't envy us like you think today.  Most other countries view us as arrogant.  And many emerging nations are no longer emerging.  They have emerged.



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Re Blackberry Ltd Down But Not Out
Posted by: forexnutca (IP Logged)
Date: January 2, 2014 02:36PM

With the advancement in quantum computing and moores law in general, Blackberry holds the key to future cryptography.  ECC.  Maybe not a moat, but definately an asset worth something as AES 256 encryption is on it's way to obsolete. [www.nsa.gov]



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Re Blackberry Ltd Down But Not Out
Posted by: kfh227 (IP Logged)
Date: January 2, 2014 04:33PM

Forex,

BBRY doesn't own that type of encyption.  Their patents relate to the implmenetation through software.  I do not know how much of amoat that gives them.

 

And yes, the government said AES will be cracked within 5 years.  Basically tells you that the mathemeticians at the CIA already broke it.  heck, they came up with "Safe Primes" and it took acedamia 20 years to figure out why.



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Re: Blackberry Ltd: Down But Not Out
Posted by: SeaBud (IP Logged)
Date: January 2, 2014 05:36PM

kfh227- you are correct that Blackberry does not "own" that encryption. Like many entities, it may (probably does) have patents that relate to the encryption. The value of their portfolio will be determined by a licensing program - something I know a lot about. It will likely generate, at most, revenue in the hundreds of millions, not billions. Therefore, while potentially significant, such a portfolio does not address the billions needed by BBRY.

I strongly question with your comments on Z10 versus IOs - you "can not stand" touching IOS phones? I think most Americans disagree, and see no sales data that indicates, in the US, disfavor of IOS/Android, except perhaps towards window phones.

I strongly agree with your comment about the rest of world being different from the US today and going forward. That (and ridiculously low valuation) was my thesis for going into Nokia at $3/share (sold out after Microsoft buyout). I think windows/android are taking big bites out of non-US markets and I doubt a proprietary system like BBRY will gain much traction in India or China. I do not see the sensitivity to security by the average buyer or company there? If BBRY does not compete on price in India/China, what will they sell on? What am I missing? I happen to think Apple will lose market share internationally going forward, but am not sure of the winner of that share. Please tell me what you see that causes you to believe Z10 gains market share vis-a-vis IOS/Android or windows in the US or otherwise? Thanks.


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