by Tom Taulli | December 20, 2013 11:52 am
After a horrendous year, BlackBerry (BBRY) did get some nice news today. BBRY stock is up around 12% as of this writing, following the release of third-quarter BlackBerry earnings.
And those gains for BBRY stock came even though the company posted a whopping $4.4 billion net loss. Then again, Wall Street was expecting a horrible quarter. And over the last three months, BBRY stock has still lost around 40% of its value.
Even when excluding one-time items and restructuring charges, the BlackBerry earnings report still showed a loss of $354 million or 67 cents a share. What’s more, BBRY revenues plunged from $2.7 billion to $1.2 billion, which was below the analyst consensus of $1.59 billion.
For the most part, BBRY is really just trying to stabilize the situation. To this end, interim CEO John Chen has written off $2.7 billion for unsold devices (much of which were BlackBerry Z10 phones), engaged in aggressive cost cutting, fired various senior executives and pulled off a capital raise of $1 billion (in the form of convertible notes).
As a result, the cash position has expanded from $2.6 billion to $3.2 billion. (Keep in mind that the market cap for BBRY stock is only about $3.5 billion!)
But the main priority for Chen is to somehow get back to profitability. So he has struck BlackBerry a five-year partnership with Foxconn Technology to outsource the manufacturing of devices. All in all, this should help improve the cost position and provide some stability for BBRY stock.
Still, the real problem is that BBRY needs to start creating phones that people want to buy. But unfortunately, the product offerings are lackluster, especially in comparison to alternatives from rivals like Apple (AAPL) and Samsung (SSNLF). Even Microsoft (MSFT) has become a factor; newly owned Nokia has gotten traction with its Lumia models.
As for BlackBerry, in the latest quarter, the company sold only 4.3 million units. Of these, about 3.2 million came from older models.
For the most part, it is really too early to get a sense of BBRY stock. Again, the company needs to get its product mojo back. But with third-quarter BlackBerry earnings, there were no signs of this. At the same time, it is far from clear if it can monetize its enterprise software and messaging services at scale.
So given all this, it’s probably best to avoid BBRY stock for now.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
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