Should You Buy BlackBerry Ltd (BBRY) With Enterprise Mobility And Security In Mind?
BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shares are trading near the 52-week low price for quite some time since the first quarter miss. Though its revenue from software witnessed growth, it was below the Street expectations after excluding adjustments. The second quarter comes to an end in the current month. Its smartphone division is generating revenue only to make continuous losses. Therefore, the question is whether an investor can invest the hard earned money merely on security and enterprise mobility. Both the segments are growing, and the investments should be lower than what they invest in hardware. Before the second quarter results provide some hindsight, let’s look at how things are shaping up.
Ready To Sell Smartphone Division
BlackBerry Ltd (NASDAQ:BBRY)’s CEO, John Chen, has undertaken a turnaround plan during the later part of the year 2013. Since then, his focus has been on software and security, as well as privacy. The company’s name was Research-In-Motion earlier and invented a smartphone with the brand name ‘BlackBerry.’ There was a time when it virtually ruled the global market, since it was the only device to have several features over the normal mobile device. It was very useful for the sales team of any company. There was a time that not many knew about the name of the company but only the brand name, BlackBerry. Because of that very reason, the management decided to rename it BlackBerry Ltd and see its fortunes.
As far as the smartphone segment is concerned, fortunes refused to change, since the rivals were aggressively marketing their smartphones. Therefore, its revenue from the division continued its downtick even in the most recent first quarter. The company’s smartphone division suffered a 31% drop in revenue, and its market share slipped below the one percent level. Currently, the company is hoping to sell its smartphones directly to bulk buyers like government agencies or corporations. However, during a recent interview, John Chen said that at some point of the time, the economics should matter. Therefore, he indicated that if there is a need to sell the smartphone division, BlackBerry Ltd (NASDAQ:BBRY) is ready to sell them.
That is subject to turnaround plans facing hurdles from the smartphone division. Otherwise, the company is ready to continue to make the hardware. It appears that the company’s founders were more eager to continue making the smartphone. Significantly, the company has been generating cash from its operations in the last two quarters, unlike losing cash in the past. Though the company indicated that it was losing money on the smartphone, its focus has shifted towards realizing better margins and not to involve in any other type of selling, like distress or at a discount.
Enterprise And Security As Business Model
Security is undoubtedly becoming a big issue at the global level. There is no doubt that it provides immense potential, and there is enough room for growth opportunities as the area to cover is wider. It does not stop in providing security to a device. It goes beyond that to safeguard everything, be it medical devices or Hollywood movie scripts. However, the importance lies in the way it is taken to logical ends. Recently, BlackBerry Ltd (NASDAQ:BBRY) demonstrated how its products can address the current day issues. Its CEO, John Chen, indicated that much of his transformation depends on the progress in the work undertaken.
Though some analysts are skeptical about the company’s path in software, Chen expressed his satisfaction about the progress made so far on the turnaround plan. He said that the plan was to achieve $500 million in revenue from software, and he is still comfortable with the commitment for the current fiscal year that ends in February. However, there is a glitch in achieving the turnaround within the targeted time frame. Chen said that the promised turnaround would take longer than initially expected. According to its original schedule, the company is two quarters away from witnessing the real benefits of its turnaround plans. Now Chen wants one to one and half years to offer rewards for BlackBerry Ltd (NASDAQ:BBRY) investors.
Doing It Right Things For Long Term
The company’s CEO, Chen, believes that whatever he and his team are doing, they are in the right direction for long-term growth. He does not want to hurry up and is patiently building the product pipeline, as well as the sales channel. He said that there was a lot of work to do still. Interestingly, Blackberry has involved itself in acquiring niche software-focused firms during the last one and a half years. That would allow the company to build a larger sales team, apart from tapping the telecom carriers’ sales staff to market its security-focused products.
BlackBerry Ltd (NASDAQ:BBRY)’s COO, Marty Beard, said that since it was not established to cater to the software segment, it was not an easy job to be there. However, he said that the steps taken so far have enhanced its capability to both identify, as well as target the potential clients. Also, one thing is sure. If the company is generating cash flow, it is primarily because of security and the enterprise mobility.
Despite indicating willingness to sell the smartphone division, Chen said in another occasion that the hardware continued to be an important element of its end-to-end platform. He said that the company is trying to capture a higher share of enterprise revenue, as well as service such customers who rely on its enterprise-grade mobility solutions.
BlackBerry Ltd (NASDAQ:BBRY)’s CEO, John Chen, is comfortable with the enterprise mobility and security. The company is focusing on margins on smartphones, which meant losses on device sales will not be there. Also, positive cash flow was witnessed in the last two quarters because of the software revenues. The company might fall short of revenue expected levels. However, it will lead to profitability in the next one or one and a half year’s time. The second quarter results should shed more light. Those who are willing to take a few risks, this is the right time to buy the stock.
Disclaimer: The opinions and data expressed herein by the author are not an investment recommendation and are not meant to be relied upon in investment decisions. The author is not acting in an investment advisory capacity, nor is this an investment research report. The author’s opinions expressed herein address only select aspects of potential investment in securities of the company or companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that potential and existing investors conduct thorough investment research of their own, including detailed review of the companies’ SEC filings, and consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice.
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