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I Told You So … BlackBerry Is DOOMED

BlackBerry (BBRY) stock, formerly known as Research in Motion, had an ugly June; BBRY shares gave up more than 25% at the end of the month amid soft sales reports for its new smartphone line and weaker-than-expected BlackBerry earnings.

Looking forward, we can expect more of the same.

Because like I have been saying for quite some time, even amid a brief updraft in BBRY stock, it is clear that BlackBerry as we know it is doomed. Here’s why:

Ugly Earnings: Shares crashed recently after BBRY posted a loss of $84 million on the quarter, a surprise loss. The company lost money last fiscal year and was already projected to run in the red in the current fiscal year, so it’s not like the bar was very high … but clearly you have to start making money eventually or the lights just go out. Details were bad, too — subscribers down, inventory up, and so on.

Ugly BB10 Sales: About those details: Worse than the minor loss was the major disappointment on Wall Street over gadget sales. With only 2.7 million BB10 devices shipped, there are concerns that the Q10 and Z10 will not be the game-changers many had hoped — especially with BBRY enterprise clients. Management continues to urge patience, but history shows that most gadgets don’t get a second life a few months in after launch. After all, a year from now we will have a host of new Google (GOOG) devices, powered either by the company’s own Nexus line or just its open-source Android OS, and probably new iPhone offerings from Apple (AAPL). You can’t afford to wait on BlackBerry to win over customers.

Ugly Tablet Strategy: Let’s not even dwell on this. A mere 100,000 PlayBooks shipped in the entire quarter? Why doesn’t BBRY just cede defeat to the iPad and Amazon (AMZN) Kindle already and kill this line altogether? BlackBerry’s CEO thinks tablets are a fad anyway, right?

Ugly Sentiment: BlackBerry was downgraded from “buy” to “hold” at Societe Generale on Monday after disappointing numbers. Analysts at Needham & Company and Deutsche Bank also downgraded BlackBerry after the results. Elsewhere, FBR reiterated its “underperform” rating while dropping its target from $11 to $9, and UBS kept BBRY at “neutral” but dropped its target from $13 to $10. Need I say more?

Valuation Shmaluation: BlackBerry has traded at a fraction of its book value for some time. According to FactSet, BBRY stock hasn’t traded for par at any time in 2013 — not even during January’s red-hot run to $18. And yes, the company has $630 million in cash flow from operations and about $2.8 billion in cash and investments, so it’s not going bankrupt. But the idea that this stock can stage a rally based on a simple look at its balance sheet has gone up in smoke — just like profits have for BBRY investors lately.

I could once again be proven wrong here, and BlackBerry could once again soar to $18 and above by year end. Maybe a big enterprise client will place a massive order in September or maybe some crazy tech company will think BBRY would be worth acquiring for its security, messaging and programming assets. Or maybe the short sellers will get hit with another big squeeze later this year to inflate the stock price.

But I doubt it. The deck seems stacked against this perpetual underperformer.

I’ve said it before and I’ll say it again: There’s room for smartphone players beyond the iPhone and Android. And there’s an especially profitable niche for business and enterprise functionality on handsets. But Microsoft (MSFT) has deeper pockets, equal enterprise credentials and a nearly panicked ambition to figure out mobile right now.

My money is on MSFT to become one of the other bit players here, especially if the Z10 and Q10 continue to be as mildly received as the numbers indicate.

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Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.

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Comments
  • mobileadmin

    Blah, blah, blah.

    I love how the market thinks you can turn around in what 5 months?! Microsoft has been pumping Windows 7, 7.5 and now 8.0 for 3 years now and it has little to no traction.

    A big difference is go find one big company using Windows Phone. The platform is a failure but Microsoft will keep throwing money at it. I’ve yet to meet anyone outside of Microsoft employees who use one. So it’s ok for Nokia, HTC to post bad quarters but it’s end of the road for Blackberry?

    The Q10 was out 2 weeks for this past Quarter, it’s likely the Blackberry many of the legacy users have been waiting for. If you prefer a keyboard based smartphone – and yes there are people out there who do. What other device is there? The OEM’s are basically conceding the qwerty market to Blackberry at this point. What is that worth?

    The smartphone was plateaued hardware wise. Your going to see marginal CPU and camera spec jumps. It’s all about the software and sadly for Apple they are stuck with a limited OS that they will freshen up the UI visually. Android is marching toward a phaphlet platform, does everyone want a 5+” device in their pocket?

    Now I don’t think things are all roses for Blackberry and they have some serious work to get done and execute. They need to fix their marketing, it’s not working or frequent enough. They need to fix the App gap which keeps many consumers from wanting the device. Use some of that stock pile of money and pay for developer support. Every App has a price tag.

    Release BBM ASAP for iOS and Android. It’s still the best social chat App on the planet.

    Find an OEM who will use BB10, better yet consider making it open source like Google did. Your best money is with the services (BES10, BYOD management) anyways.

    Curious who would buy Blackberry? They have a lot to consider and it would be tough to break it apart for select parts. You also have Canadian government that would question the sale. HP and Dell sorely need to get into the mobile vertical and Windows Phone / Windows 8 is not going to help them (See Windows RT total flop). If they went Android they’d just be another OEM going against Samsung, good luck with that. If HTC and LG can’t make any progress how would they?

    I might be crazy but I think Blackberry should approach some of the camera OEM’s. They have to be feeling the pain of smartphones eating away point and shot market. Partner with them and bring a really good camera spec to mobile.

    It seems fun to throw dirt at Blackberry with every hiccup but their like a zombie. I don’t see a headshot coming soon. They need the next quarter or two to show BB10 growth. If they can’t show any growth then yes – they have some issues and will have to consider their options which could be leaving the hardware / OS market and focus on services and support. Just like IBM did awhile ago. With no debt they have some time and options to keep plugging (much to those short and pro Apple/Google/Microsoft) dismay.

  • Carlos Swanson

    Microsoft can keep throwing money at their phone platform because they also have Windows, Xbox, Azure, etc etc etc going for them. BlackBerry just keeps throwing more BlackBerrys at BlackBerry. Nokia is also hanging by a thread, but Microsoft keeps throwing money at the Windows phones. Apparently they may be turning to Android very very soon.

    BlackBerry needs some serious innovation. Maybe they’re gearing up for that? They’ve got QNX. QNX has their finger in a lot of pies. They have the opportunity to revolutionize the car-puter market but I haven’t heard much about that. And BlackBerry have traditionally been pretty good at announcing things waaaaay to soon, and then being super late to deliver and forced to release a piss poor product. hahaha “amateur hour is over” indeed.

  • Henry Hill