BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shares are up around 30% this year against a 6% surge in S&P 500 reflecting that the company has finally come out of the stock price reversal loop, but future concerns still remain relevant. The percentage rise might appear attractive as the company’s 2014 share-price resurgence is off a really low base. Still, the end of its share price death spiral does suggest something positive.
Chen leading the turnaround
BlackBerry stock took a dip between 2010 and 2013 of around 87%, dethroned by the touchscreen phones particularly from Apple. According to Goldman Sachs, the market share of company is less than 1% of smartphone sales, compared to around 20% in 2009.
John Chen, recently appointed CEO, is on a path to transform BlackBerry into a mobile solution company. Even though Chen seeks BlackBerry to be a relevant company in the smartphone segment, he is diverting his efforts towards services business, which contributed 54% of revenue in the quarter, an increase from 26% from the previous year. There are government agencies and other large enterprises who use the service of the company. John Chen stated that the company will launch new smartphones this year, which will boost its revenue, but the margin will be driven high by its service business.
Earlier, while having conversation with an analyst, Chen responded that he has high hopes for Z3, which was launched in Indonesia as demand was robust and more units were needed to cope of with the demand. To lower cost and increase focus, BlackBerry entered into a partnership with FI Mobile, the Hong Kong-listed unit of Taiwanese electronics company Foxconn Technology Co Ltd, for designing, manufacturing and sell devices.
BlackBerry fighting perception problem
Recently, the Canadian smartphone maker posted better than expected quarterly results, but Credit Suisse analysts still think that the company is spending too much cash. Following the first quarter results, where the company posted less cash spends and higher gross profit margin, shares surged to more than 10%.
“The short trade is over in this name, for now,” said BGC analyst Colin Gillis. “They’ve got enough liquidity, and they’ve given us clear profitability targets.”
BlackBerry acknowledges that the customers have serious perception problems when it comes to this company. To address this problem, the company came out with an uncommon public relations tactic by setting up a fact check portal to reveal the “smoke and mirrors” marketing tactics used by its rivals.