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BlackBerry's Turnaround is Gaining Pace

June 24, 2014 | About:

I'm still bullish on BlackBerry (BBRY) after last week's earnings. Still kind of hoping the price stays where it is now so I can continue to load in these areas when I have some funding clear over the next month.

Every interview that I've seen with John Chen (and I've tried to catch almost all of them since he's been CEO), there's been one recurring statement that he makes to justify a lot of his answers. That statement is: I work for the shareholders.

I mean, sure - he's also working for himself and the bonuses and money he's entitled to if he turns around the company. But, having the perspective to look at things through the lens of the share price and the value bestowed onto the company at this point in its growth is the exact right way to look at things. This isn't a time to get creative and spend more money - this isn't a time to bet everything on another product launch. It's time for BlackBerry to get serious, hunker down, and start putting in pragmatic plans to return the company to growth - after stopping the company's bleeding.

We're getting there - and I was happy to see the news reported this morning with regards to BlackBerry's handsets. It goes to show exactly why John Chen is an asset for this company, and its shareholders.

It was reported last month that BlackBerry CEO John Chen plans to reduce the company's reliance on handsets, but if he can't return the business to profit, he'd consider selling it.

He said, "I don't have a plan to get rid of handsets, I have a plan to not be dependent on handsets," Chen told Bloomberg. To Reuters, he said, "If I cannot make money on handsets, I will not be in the handset business." Chen also said that the time frame for a decision is short.

Notwithstanding, BlackBerry's basic plan is to replace plummeting device revenue with income from its QNX software and BBM instant-messaging services. The company is focusing on security, allowing its software to be installed in different devices so that they can "speak to each other," and on selling to large customers such as governments and corporations.

What does this tell us? It tells us that John Chen is going to do absolutely anything and everything that he needs to do to stop the bleeding and return this company to profitability. He doesn't seem to care how small the company gets, this is about protecting the cash that they have for now, while reducing the size of the company to the smallest it can get - so that they can then focus on rebuilding yet again. John Chen isn't emotionally attached to any part of BlackBerry and that's one of his best assets.

This is where Chen is different than a guy like Heins. Heins is someone who was so emotionally attached to the BlackBerry brand, he would have never considered selling the handset business - and if he did, he would have never made mention of it so casually, as Chen did.

Do I think BBRY will ultimately sell the handset division? No. Am I glad that John Chen has an "all options on the table attitude" towards making shareholders money? Yes.

We also saw this, "no BS" attitude in action when BlackBerry decided to not renew their deal with T-Mobile:

Less than amused with a T-Mobile USA (TMUS -0.1%) ad campaign urging BlackBerry (+1.4%) owners to buy iPhones, BlackBerry says it won't renew T-Mobile's license to sell its products, which expires on April 25. Existing users on T-Mobile's network won't see any changes.

As it is, T-Mobile stopped stocking BlackBerrys in its retail stores six months ago (they've remained available online). Moreover, with local sales having plunged, the U.S. now only accounts for a small fraction of BlackBerry's hardware sales, and T-Mobile (has a relatively small corporate base) a small percentage of U.S. sales.

Call me crazy, but mark my words - there will be a day when T-Mobile might wind up coming back to BlackBerry. It could be years from now, but mark my words.

Meanwhile, while BlackBerry continues to figure out exactly how it's going to make its comeback, the market's confidence in the company continues to wane. But, that leaves opportunity for those of us still looking at the balance sheet strength and the fundamentals behind the company.

Chen is predicting cash flow neutral in FY 2015 and this company is trading with a price to book value that continues to move downward. BlackBerry has plenty of cash on hand to do their business with, and if you believe in Mr. Chen like I do, this is prime pickin' to get in and buy BlackBerry at these levels.

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