BlackBerry Turning Around or Falling Down?

Jianyu Zhao  |

BlackBerry Limited (BBRY) , the former mobile giant, made a move on June 18 to keep competitive on the fierce smartphone market through the partnership with Amazon (AMZN) . The stock had gained 2.22 percent to $8.23 per share on the news. According to the announcement, Amazon Appstore will be available with the launch of the BlackBerry 10.3 operating system this fall, greatly expanding access to thousands of the most popular apps and games to BlackBerry customers. The appstore will bring more than 240,000 apps to BlackBerry devices, including Groupon (GRPN) , Netflix (NFLX) , Minecraft, and Pinterest.

The troubled mobile company did have a brilliant history, before iPhone of Apple (AAPL) , and Android of Google (GOOG) overtook its offerings. But just when it seems that BlackBerry is on its last life, there’s always a sign of comeback.

Is A Rebound Coming? The Bull’s Case

BlackBerry designated its current CEO John Chen in 2013, who was considered as the great hope of BlackBerry. The stock hit  approximately $11.00 per share in December 2013. Chen’s has continued attacking BlackBerry’s problemsfrom varying angles, utilizing its enterprise server business, the BlackBerry messaging app, and hitching the business to what he calls “regulated industry” customers.

These regulated industries include customers like banks and government entities, ones that have been the crux of BlackBerry’s business for long time. Chen wants to win them back by managing their device servers, while remaining device agnostic, which is the idea behind the future of BlackBerry Enterprise Server, and the new BlackBerry Enterprise Server 10 Cloud. The cloud version is aimed at mobile management hosting through for iOS, Android and BlackBerry devices.

In the recent months, Chen has also launched multiple new ventures for the struggling mobile brand. In mid-May, BlackBerry unveiled what it is calling Project Ion, an initiative to connect all types of devices to the Internet. It will offer the resources necessary to access massive amounts of data from multiple disparate sources and distill it into meaningful, actionable information using open source and third party analytic tools.

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“As connectivity costs continue to fall and connected technologies become pervasive, a new market is emerging – the Internet of Things,” said Chen in a statement. “Billions of connections, generating trillions of transactions and exabytes of data daily, will require platforms that operate securely on a global scale. No other company is in a better position than BlackBerry to provide the technological blocks, applications and services needed to enhance productivity, improve real-time decision making and deliver on the vision of the Internet of Things.”

BlackBerry aims to build up an ecosystem of its own to collect data and provide cloud-based services to customers. Apple and Google are also working hard at retaining loyal customers and building user-friendly systems of their own to invite customers to rely increasingly on their own proprietary offerings, so BlackBerry faces plenty of competition on this front. Apple is trying to increase its presence in this market with the new HomeKit app, while Google has made a big splash by purchasing startup company Nest, a maker of “smart” thermostats and smoke detectors, for $3.2 billion.

When talking back to the tie-up with Amazon, it makes sense for Chen to emphasize BlackBerry’s software over its hardware. And investors have gotten somewhat optimistic about BlackBerry earnings in recent months, though the stock has performed poorly, falling 14 percent since mid-March 2014.

According to BlackBerry’s most recent quarterly results, revenues plunged 64 percent, falling below the $1.00 billion mark for the first time in six years. But BlackBerry’s losses were much less severe than investors had expected.

It’s Not the Time to Celebrate: The Bear’s Case

It seems nice for BlackBerry to rebound with the expanding Amazon. Investors bidding up these shares may think the new apps suddenly make BlackBerry devices cool. However, what really matters is the designs and marketing where they should start fixing itself lest BlackBerry goes completely out of business.

BlackBerry has lost its strengths, without the monopoly on enterprise device security. And with more corporations embracing Apple’s Touch ID fingerprint sensor, BlackBerry’s enterprise decline may likely accelerate. In the recent quarter, BlackBerry sold a paltry 1.9 million devices, which was much lower than that of Apple’s 51 million iPhones’ sales. In fact, the sales of 1.9 million amounted roughly half of the previous year’s sales. The deal with Amazon suggests the vast majority of the apps will be made available on the BlackBerry 10 devices. But if no one is willing to buy that phone, then who cares about the apps?

In terms of the stock itself, BlackBerry has experienced a steep decline in earnings per share in the most recent quarter in comparison to its one-year-earlier performance. The company has reported a trend of declining earnings per share over the past two years. During the fiscal year 2013, BlackBerry reported poor results of -$11.17 versus -$1.20 EPS in the prior year. The company has also seen earnings significantly decrease by 531.6 percent, from $98.00 million to -$423.00 million. Return on equity has greatly decreased when compared to its one-year prior ROE. This is a signal of major weakness within the corporation.

BlackBerry will report fiscal first-quarter earnings June 19. Analysts will be looking for $0.25 in earnings per share on revenue of $969.56 million, representing close to 70 percent year-over-year revenue decline. Revenue estimates have dropped more than 10 percent over the past three months, coinciding with the stock’s pullback during that span.

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