BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) is making good progress in its turnaround. According to a report from RBC Capital Markets, published on May 5, 2014, things are looking much better at the Canadian firm, “with the restructuring achieved” a quarter earlier, and also hardware profitability now “seeming within reach”. Now, according to analysts Mark Sue, Paul Treiber and Ameet Prabhu, the focus of the company should be to stabilize the enterprise subscriber base.
Catalysts going forward
Many BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) loyalists are now buying the BB-10, but some are still considering other options. BlackBerry’s EZ Pass allows a user to freely upgrade BES10 from the earlier version, and “competing MDM vendors to stem attrition.” BlackBerry is expected to come out with BES 12 in November, which according to analysts, would be a good catalyst for users to upgrade from the older versions. However, analysts believe that the company’s service revenue, which declined 13%-15% quarter over quarter, may feel the pressure.
BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) holds over 50% of the auto infotainment OS market, accounting for more $100 million in annual revenue. The strength in the auto sector reflects “positive testament of the stability and reliability of QNX’s real-time micro-kernel architecture,” according to analysts. How much the company can further capitalize on this segment remains to be seen.
BBM service enjoys around 85 million active monthly users, compared to 60 million before launching the app on iOS and Android. According to analysts, BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) could use its messaging app to differentiate its enterprise service from other vendors, as the Canadian firm is the only MDM vendor that also has a messaging platform. However, in consumer segment, the company is well behind rivals like WhatsApp and iMessage.
Margins to improve for BlackBerry
Even before the official launch on May 13, BlackBerry Z3 “Jakarta” is now available for pre-order. Analysts believe that the device, which is manufactured by Foxconn, may improve the margins for the Canadian company. A second run of the Bold at contract-manufacturer Wistron, could also have positive impact on the handset margins for BlackBerry. Analysts expect handset margins to show improvement in the first quarter of 2015 based on the strong Z3 pre-orders and Bold transition. How the company will sustain the margins long term is still a question.
BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s balance sheet “appears strengthened,” which according to analysts, will give the company more time to effect a turnaround. Improved financials will also help the smart phone maker to achieve its milestones including a cash flow break-even by the end of FY15.
The RBC Capital Markets analysts have a Sector Perform rating on BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) with a price target of $11.
