CIBC Research analysts Todd Coupland and Robin Manson-Hing rate BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) as Sector Underperform as they provide takeaways from their discussions with CFO James Yersh. Report below:

BlackBerry

Meeting with BlackBerry’s CFO James Yersh

On Thursday, January 30, we met with BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) CFO James Yersh. Our overall takeaway was that cash flow positive territory can be reached by Q4/F2015 and opex cuts can be in line and perhaps even below previously announced plans. Other material points were learned as well.

The update on restructuring was better than we expected. Quarterly expenses of ~$900MM should go to $500MM. It was indicated that current goals are well below $500MM by outsourcing hardware R&D engineers (3,000 to 1,500), lower IP royalties paid (by~$1B) and leveraging of assets.

BlackBerry’s cash position

BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s cash position looks good at $3.2B. BB’s plan is to sell most of its real estate (~$300MM) and see a tax refund ($500MM) that will add ~$800MM in cash. Our view is BlackBerry’s cash burn will be no more than $1.1B over the next year, leaving over $2.9B in cash at the targeted cash flow B/E point.

Service revenue declines remain a material hurdle. CEO Chen’s focus on the enterprise will take time to implement in terms of building out the sales force and convincing enterprises to pay for BES10 security, audit and BBM. Evidence that this is happening or can happen remains our major issue.