BlackBerry Stock on Shaky Ground Ahead of Earnings

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When BlackBerry (BBRY) reports earnings on Thursday, investors will be looking for the answer to one all-important question: Can the once-dominant and recently battered smartphone manufacturer recover lost market share and profitability? Or have competitors like Apple’s (AAPL) iPhone and Google’s (GOOG) Android delivered the knockout punch?

blackberry stock earnings bbryWall Street is looking for Canada-based BlackBerry to post revenues of $969.6 million in the fiscal first quarter, with a loss of 25 cents per share. As losses have piled up, BBRY investors have grown accustomed to bad news – and analysts have adjusted their expectations accordingly.  For example, the top line estimates reflect a 68% decline year over year.

With that in mind, is BBRY poised to soar or slump after Thursday’s earnings report? And is there anything left to like about the stock? Here are three pros and three cons for BlackBerry stock:

Blackberry Stock Pros

John Chen may be the right leader at the right time: BlackBerry CEO John Chen, who came aboard last November after Thorsen Hines was ushered to the door, gives BlackBerry stock its best chance of reversing the company’s recent bad fortune. Chen has been here before: As CEO of struggling database company Sybase, he identified a hot emerging market — enterprise mobility management — and refocused the company in that niche. Sybase soared. The only question is whether he can do that twice.

Mobile security, Internet of things present opportunities: Enterprise mobility is a huge market opportunity for BlackBerry (as is security), and it is well positioned to deliver on both. Toward that end, BBRY unveiled BBM Protected, the first component of its eBBM suite for secure enterprise-class mobile messaging. With this product, BlackBerry is both enabling access and productivity for mobile workers, while deploying the added security and compliance required by enterprise customers. Chen takes a holistic view of the emerging Internet of Things, starting with BlackBerry Messenger. While handsets and security will drive deployment, gaining the full advantage of machine-to-machine (M2M) communication will require a robust server and network operating system.

Cashing in on mobile payments: BBRY took a giant step forward in its mobile payments strategy last week when it inked a three-year deal with EnStream to support payment transactions between banks and customers. EnStream is a joint venture of three Canadian wireless companies: Bell Canada, Rogers Communications (RCI) and Telus (TU). EnStream will use BBRY’s infrastructure to provide secure payment credentials between financial institutions and mobile operators, enabling any smartphone with near field communication (NFC) — that includes NFC-enabled Android devices and any future iPhone that is NFC capable. This potentially is a huge deal for BlackBerry stock because it is securing the entire network, regardless of payment system, bank, mobile operator or device.

On the other hand…

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BlackBerry Stock Cons

BBRY’s leadership churn: By every possible measurement, BlackBerry stock has been bruised and bloodied in the past three years. Since 2010, BBRY has struggled with multiple leadership changes and strategies, as well as massive layoffs. BlackBerry stock has plummeted nearly 90% since March 2010, sinking the career of Thorsen Heins, who took over the top after co-Chairmen and CEOs Mike Lazaridis and Jim Balsillie resigned. By November 2013, however, impatient investors pulled the plug on Hines, tapping former Sybase CEO John Chen to turn the company around. Chen’s bold strategy has grabbed Wall Street’s attention, but now he must execute without fumbling.

Tough competition: BlackBerry continues to battle a full-on assault from competitors like Apple and Google. Chen recently hinted that launching a BlackBerry phablet could be the next step in BBRY’s strategy to win back market share. Over the past year, phablets have more than doubled their share of smartphone shipments, according to a report by International Data Corp, growing from a 4.3% share of the smartphone market in April 2013 to 10.5% in Q1. Although phablets are a fast-growing smartphone niche, BBRY again faces brutal competition in this space.

Enterprise focus may not be enough: BlackBerry’s greatest strength has been the proliferation of its devices in enterprises and government agencies. Examples range from President Barack Obama’s fight to keep his device to the Pentagon’s commitment to 80,000 BBRY smartphones announced in January. Nevertheless, that strategy fails to acknowledge the fact that smartphone and phablet purchases are being driven by consumers — not enterprises or government entities. Consumers fall in love with new devices, purchase them on their own and then want to bring them to work or use them to access corporate networks. BBRY can offer a lot when it comes to securing and managing bring-your-own-device environments, but it must build a better mousetrap for consumers.

Bottom Line for BlackBerry

I think BBRY will slump rather than soar after its earnings release on Thursday, even though Chen tempered expectations by saying that the turnaround would be a “six- to eight-quarter journey.” Look for any early results from BlackBerry’s launch of low-cost, Z3 smartphones in emerging markets like Indonesia and India — that will be a key to whether BBRY’s low-end devices are carving a new market opportunity for the company.

Although there are some bright spots in BlackBerry’s game plan, I don’t expect to see BlackBerry stock soar after earnings this week — but it remains a stock to watch over the long haul.

As of this writing, Susan J. Aluise did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2014/06/blackberry-stock-earnings/.

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