BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s CFO James Yersh plans to lower the operating expenses well below the $500 million in the quarter target to make the company cash positive by the end of fiscal 2015, according to CIBC World Markets analyst Todd Coupland.
Lower royalties to benefit BlackBerry
According to Coupland, BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) might become cash positive by the fourth quarter of fiscal 2015, and expenses might be low than what was announced before. Coupland has stated these possibilities after holding a meeting with James Yersh, says a report from the Financial Times.
Yersh discussed plans to bring down the BlackBerry’s cost of goods sold due to lower fixed royalty payments in 2015. Yersh is anticipating that the patent royalties, which will expire by November, are around $800 million. These royalties will become Zero next year with reduction in the variable royalties paid by the company, which amounts to $200 million, due to a lower number of devices sold.
“This will further help the company’s plan for positive cash flow by executing its already defined operating cost reduction plan,” the analyst said.
Plans to monetize patents
Apart from this, the CFO of the company is also planning to capitalize on the patents, expecting to earn more from the amount invested in acquiring or developing a patent. BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) is in search of alternatives to capitalize on its intellectual property, which could help the company to shift from net payer role to net collector role. Blackberry has more than 12,000 granted and pending patents.
“Our Blackberry stock view hinges on the success of turning around the services revenue decline and stabilizing its enterprise base. Cost cutting can only take Blackberry so far,” the analyst said, and added that the real challenge in front of BlackBerry is to convince the enterprise customers that purchasing its mobile devices and services is a rational decision. So far, there is no such data showing that BlackBerry has moved ahead in this direction.
Coupland has assigned a price target of $5 to BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) while updating his cost of goods sold metric. Analyst expects the gross margin of the company to move up at 31.1% from the previous 27.4%.
Measures to lower cost and increase the revenue may not be very exciting for customers, but mark the steps that the company is taking in 2014 to reshape the organization.
