BlackBerry has potential upside of nearly 30%, believes Daniel Chan at TD Securities. Chan, in a recent note to investors, cited four reasons for his stance: upside in the software business, the hardware business, the patent portfolio and the cash pile.
Software and hardware businesses
With the continued shrinking of the hardware portfolio, the Canadian firm has shifted its focus to software, and it seems as if this approach is paying off well. BlackBerry’s software sales came in at $183 million in the last quarter, representing 100% growth over the previous quarter. The acquisition of Good Technology for $425 million was the main cause of this increase, the analyst says.
Maverick USA was down 3.3% for the second quarter, while Maverick Levered was down 2.1%. Maverick Long Enhanced was up 8%. Year to date, Maverick USA is up 31.8%, while Maverick Levered has gained 49.3%. Maverick Long Enhanced has returned 9.9% for the first six months of the year. Maverick Capital is a long/ short Read More
Though BlackBerry’s hardware business is not doing great, it made some meaningful improvements in this area. Outsourcing production to Foxconn has been the most notable as it helps in lowering costs and eliminates inventory risk. Also the shift to Android also helps lower costs.
BlackBerry has a couple of options. The Canadian firm can continue making Android devices, and this it will most likely happen, provided its first Android device, the Priv, is successful. If the Priv fails to catch on, the company might exit the handset business altogether, and this move will win applause from investors.
BlackBerry rich in patent portfolio and cash
Another reason is BlackBerry’s patent portfolio, which is an important aspect of its turnaround, said CEO John Chen while speaking at company’s annual general meeting. Chen has certainly been adding to this asset. During the first quarter, BlackBerry entered into a big licensing deal with Cisco. The company spent $53 million on the multiple deals it signed last quarter, and more deals are expected to be signed in the coming years.
BlackBerry has a strong balance sheet, and this is not common among companies in turnaround mode. The company has $1.2 billion in cash and another $1.3 billion in “short-term” investments. It can utilize this money in several ways, like for boosting its software business, or it can make some more big acquisitions or perhaps repurchase a large swathe of shares.
On Thursday, BlackBerry shares closed up 3.06% at $7.40. Year to date, the stock is down by over 20%, while in the last year, it is down by over 27%.