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Hello fellow monkeys !

BlackBerry is changing. After losing 80% of its market value over the last two years, the Canadian company is finally trying to do something right. It started early this month with a ticker change from the old RIMM to BBRY and the release of the new BlackBerry Z10. Their attempt to turn the company around will continue with a likely change in the company name at the shareholder's GA later this year, but that will not be enough to save BlackBerry.

The first main change was the ticker change. At least, the company understood that they could not try to be a player on multiple markets and should focus on their blackberry unit. Furthermore, the company has been shutting down some of its (less efficient) subsidiaries over the last couple of years. They also laid approx. 35% of their workforce off since 2011 in order to cut their losses, but the markets did not care. Their only hope lies with their new BlackBerry smartphones and OS.

The newest BB operating system and phones were presented on January 30th at the company's launch event. This new generation works on the BB10 OS and comes in two flavors : the Q10 - similar to the older versions of the BlackBerry Bold but will only be sold in the second quarter of 2013 - and the Z10 which is 100% touchscreen and looks very much like the competition. The Z10 started selling in February (available starting March in the US) abroad, but even with an interesting Super Bowl commercial the crowd is not responding. Tech sites such as Gizmodo and VentureBeat call it "not good enough" and a "boring beta meant for no one."

To top it off, former CEO Jim Balsillie sold all his BBRY shares at the end of 2012 (DealBook) indicating his belief that the new BlackBerry line will not be enough to save the company Even a longtime RIMM analyst admited that the new devices will not be sufficient to significantly rebuild the company's market share.

The company's future is left open to speculation. I think the likeliest scenario includes a buyout by some PE firm, especially considering their patent portfolio and their good QNX software. What's your take on BlackBerry ? Will they succeed and turn their company around or do you think they're done ?

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Comments (12)

  • kyleyboy's picture

    I think they're done, PE firms will probably buy them out. They are a great buyout opportunity.

  • BTbanker's picture

    iPhone>Blackberry>Android>Windows

  • adapt or die's picture

    I just recently got long, I think the biggest thing for BBRY going forward is how successful they are with keeping their existing users on the blackberry platform. For example, most of the MDs at my company still use blackberry phones and are now finally looking at other options (I assume this is the case for many people in the 40-65 demographic). This group seems to like the hard qwerty keyboard also and BBRY will be the only legit player with that keyboard as an option.

    The analyst as Jefferies who covers BBRY has written some interesting stuff, he's been pretty bullish on BBRY as a turn around story. One thing he notes is that the sales necessary from the new Q10 and Z10 to move the needle for BBRY is very modest so if they can gain any sort of traction with these devices this thing prob goes to ~$30.

    It should be an interesting case study either way.

  • In reply to adapt or die
    blackthorne's picture

    adapt or die:
    I just recently got long, I think the biggest thing for BBRY going forward is how successful they are with keeping their existing users on the blackberry platform. For example, most of the MDs at my company still use blackberry phones and are now finally looking at other options (I assume this is the case for many people in the 40-65 demographic). This group seems to like the hard qwerty keyboard also and BBRY will be the only legit player with that keyboard as an option.

    The analyst as Jefferies who covers BBRY has written some interesting stuff, he's been pretty bullish on BBRY as a turn around story. One thing he notes is that the sales necessary from the new Q10 and Z10 to move the needle for BBRY is very modest so if they can gain any sort of traction with these devices this thing prob goes to ~$30.

    It should be an interesting case study either way.

    Do you have any of his work that you could share/PM? Interested in this

  • In reply to adapt or die
    Ruhm's picture

    adapt or die:
    I just recently got long, I think the biggest thing for BBRY going forward is how successful they are with keeping their existing users on the blackberry platform. For example, most of the MDs at my company still use blackberry phones and are now finally looking at other options (I assume this is the case for many people in the 40-65 demographic). This group seems to like the hard qwerty keyboard also and BBRY will be the only legit player with that keyboard as an option.

    I've got to agree with you on the fact that BlackBerry has a really faithful userbase. However, as you said, they tend to be part of the older demographic - and this is possibly related to the fact that a BlackBerry device will get your email the second after it is sent. This will help them for some time, but you cannot expect them to fight for market share against iPhones and Androids. Without appeal to younger or new comsumers, the company cannot grow.

  • ajg1137's picture

    I am long BBRY. Bought some downside coverage as well.
    - I think, in general, consumers showed their willingness to move from iPhone and Android when the nokia windows phones were released, which bodes well for the BB10 platform, which I believe is superior.
    - Existing Blackberry user base is over 70mm.
    - I understand the dynamic of their steadily decreasing BES service revenue, which has a high marginal contribution to profitability. The company has proven it is flexible enough to downsize. I am betting they can continue to do so if necessary to mitigate margin erosion.
    - No debt on the BS
    - Some potential PE buyout interest
    - Huge potential strategic buyout interest...Yahoo
    - General quality of the new OS (yes, I've got one. and yes, I am also an iphone and android user)
    - Strong, widespread carrier support worldwide
    - Emerging market potential - widely popular brand, widely distributed product,
    - New phones fully adopted to BYOD corporate ecosystems - removed structural hurdle
    - Licensing potential - anyone think at some point some of the android makers might want to diversify away from android OS now that Google owns Motorola (I know the deal was driven by IP, but still)
    - Licensing BBOS margin could offset BES margin loss

    BB was trading at like 2x EBITDA back in June or July, but earnings have been depressed for a while. The LTM already reflected a lot of the impact the stock was discounted for. Take a look at service revenues' decrease. Granted it will conitnue to decrease and probably go away all together eventually, but I believe there are offsetting events that the market has assigned to low a probability for (i.e. new BES licenses for BB10 balance corporate security, EM sales, licensing, etc.)
    Just some thoughts.

  • DontMakeMeShortYou's picture

    Don't know the stock/company well, but one pretty negative data point: they're struggling to get enterprise customers on-board with the Z10 bc it requires an infrastructure investment and their customer continues to shift to one device vs. two (personal + professional). Interesting that none of the big banks have come out with support for the Z10.

  • In reply to DontMakeMeShortYou
    ajg1137's picture

    DontMakeMeShortYou:
    Don't know the stock/company well, but one pretty negative data point: they're struggling to get enterprise customers on-board with the Z10 bc it requires an infrastructure investment and their customer continues to shift to one device vs. two (personal + professional). Interesting that none of the big banks have come out with support for the Z10.

    It's actually the opposite. Legacy BB devices required a BES corporate infrastructure. The new ones run on MS Exchange/Active Sync. There is literally no required investment to integrate the new devices into the corporate IT infrastructure. However, there is an available enhancement to the infrastructure that is about the same expense as previous systems. Unfortunately for BBRY, I do not see a whole lot of adoption of this new BES. Why? Because I use my new blackberry at work along with everyone elses' androids and iphones; it works great; so no reason to buy system enhancement (BES10). If you use an iphone at work today, you can use the new blackberry. Whether or not the firm wants to invest in BES10 is a separate proposition in my opinion.
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  • In reply to ajg1137
    DontMakeMeShortYou's picture