BlackBerry Ltd Making Progress In Its Turnaround

BlackBerryjieyirain / Pixabay

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.

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com

16 Comments on "BlackBerry Ltd Making Progress In Its Turnaround"

  1. re: easy to improve by copying competitors

    iOS and Android have 2million+ lines of code
    BB10 60+thousand

    Good luck trying to secure or improve the performance 2 million lines of code….its bloatware at this stage, past their prime.

  2. Yes I have a BlackBerry (:

  3. Okay, I pegged you wrong… my bad! I can respect your passion and frustration – I had similar critical energy focused towards ‘fixing’ bone headed decisions rim was making when I worked there ’06-’11. Keep the faith, Mr. Chen deserves at least a couple more quarters to have some of his move materialize. Oh, and watch the secret – positive energy from all the world’s BlackBerry supporters will go a long way! Btw, do you sport a BlackBerry now? Which one if so, if not – don’t care! :p

  4. Hey your not my neighbor,are you?

  5. Well if security is so valuable, don’t you think Apple and Samsung also knows this? Software is easy to improve by copying competitors. But a patented handset is not.

  6. Oh, of course you did. Lol just like the gambler who always talks about his winnings yet lives in his mom’s basement.

  7. I want them to win, that is why I want to help.

  8. NOPE, I knew exactly when to buy and then sell, bought in at the hype of the BB10 and device launch, then sold just before it started to drop.

  9. Well the majority of the people can’t be wrong, can’t they see? For Blackberry to catch up they need tomorrow’s device today. The nice thing about it is, Apple and Samsung has not figured it out yet. This is BlackBerry’s last chance of survival. Oh and plus the name needs to be changed back to RIM. Lose BlackBerry, that’s the name that got tarnished. RIM stands for Research In Motion, that has strength,get it changed back please Chen.

  10. Hey devvv, as you are a frequent contributor on the BlackBerry articles, would you comment on your reason for offering your opinion so liberally? Do you like BlackBerry or want it to fail?

  11. Andrew Hamilton | May 7, 2014, 3:11 pm at 3:11 pm |

    Innovation isn’t about moving forward without looking at the past. It can be using old tech in new ways, and sometimes (if not always) new tech leaves users behind. Bleeding edge consumer tech is really gimmicky most of the time too.

    With regard to physical keyboards, I have a touchscreen phone, neato ya, but damn is it annoying to type on. Had blackberry introduced BB10 before I bought my current unit I would have definitely considered them.

    Fairness to public shareholders: hmm pretty sure that you should investigate executive compensation and other pet peeves before purchasing common stock. Typically common shareholders are the last in line, hence the higher expected capital appreciation. If you don’t like the game don’t play, dude. AND if you are so damn sure what will happen to BB then just short it and STFU, I’m not gonna stop you.

  12. Have you looked at BB10 during the past 15 months? Other than 1/2 their devices coming with a physical keyboard there is next to nothing one would considered “classic”? Your opinion screams that you sadly (for you) lost your azz.day trading BlackBerry.

  13. It will work. They are getting off of a Java based platform which is important. They need to provide a solution for professionals who are used to the older style but want a modern OS. They had problems because they developed a UI to attract a consumer market but it alienated the professional market. Anyone who depends on a phone to a buck is not same thing as every 16 year old girl using an iPhone (or equivalents) in the US for entertainment and gossip.

  14. BlackBerry just needs to make money. Market share doesn’t matter. They need to be successful in their markets. The US is currently not a big BlackBerry market except for professionals who value security.

  15. I work at a mobile store in one of the largest shopping malls in North America. Last year Blackberry phones accounted for 2% of our overall phone sales. 2%!!!

  16. Product design of hardware and software has not changed at BlackBerry. It appears they are continuing to focus on the exact same strategies as Thorsten did.

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