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Do-or-Die Time for BlackBerry Investors

BlackBerry (NASDAQ:BBRY) is one of those stocks where investors are strongly divided on either side.

Part of that comes from the consumer side, where Apple (NASDAQ:AAPL) iPhone and Google (NASDAQ:GOOG) Android users naturally have opinions on the gadget. There’s also Microsoft (NASDAQ:MSFT) proponents banking big on the company’s enterprise footprint catapulting its Windows Phone and Surface devices forward.

Everybody has an opinion. Mine is clearly bearish — whether it was my recent posts here and here proposing buying puts, or this Jan. 8 headline, “I Still Think RIMM and BB10 are Doomed.”

But I won’t waste any more breath on my arguments. The bottom line is the bottom line: Now that the Z10 is out (with the Q10 to follow in coming months), actual sales numbers are going to tell the story and affect the stock price.

The fact that shares tumbled almost 8% the day the Z10 hit the shelves in the U.S. (and is trading down again early today) is an inauspicious sign. But again, hard sales numbers and profits are all that really matter, not rumors or speculation, and we should start seeing them soon.

A very bullish contingent on Wall Street remains convinced that a lukewarm consumer reception would be disappointing but not the final nail in the coffin. BlackBerry does enterprise best, and business adoption is what the company really will cash in on. The idea is that, even if BlackBerry can’t topple Android or iOS and even if Windows Phone gains momentum, the device can certainly fill a niche in corporate IT that makes it profitable.

A Morgan Stanley analyst embodies this view, upgrading the stock recently because the new BlackBerry 10 OS will raise margins and move over a host of old-school users waiting for a new platform — and judging against predictions in dramatic service revenue declines and a device business valued at about zero, it’s not going to take much to result in a positive surprise.

Still, there are big risks — risks that I personally think make BlackBerry a dangerous stock to hold.

Mainly, it’s not making money.

BlackBerry still is expected to report a fourth-quarter loss Thursday since the Z10 wasn’t even unveiled during the previous reporting period. So if things do miss the mark, there is no room for error.

Furthermore, why is BBRY stock considered the natural beneficiary of corporate IT spending, not the Windows Phone? I think BlackBerry bulls grossly underestimate the power Microsoft has here with a great enterprise footprint, powerful cash flow, some $66 billion in cash and the same back-against-the-wall desperation to get mobile right. The difference is that Microsoft can afford to miss the mark a few times and still not fall apart, while BlackBerry has no margin for error since it is unprofitable and has no other revenue streams.

And it’s not like Apple is completely dead on arrival with enterprise. The fact that the Department of Defense just dropped BlackBerry gadgets for iPhones is a pretty good vote of confidence when it comes to security of iOS devices.

Some claim you can sell BlackBerry patents alone for $12 to $15, so the stock should be valued at that. However, keep in mind that what you think something is worth and what vulture investors are willing to pay to a company on the brink are two different things.

Consider Kodak (PINK:EKDKQ), which theoretically had all those great patents but wound up declaring bankruptcy anyway. Those who were interested simply waited for the fire sale bankruptcy auction instead of paying a premium.

So don’t think “unlocking value” from patents is going to save BBRY stock.

For investors, it’s all or nothing on the Z10 and Q10. Unless you like those kind of games and unless you are supremely confident in BlackBerry, my advice is to sit this one out.

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