BlackBerry Ltd (BBRY) Stock Needs More Than a Successful Lawsuit

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BlackBerry Ltd (NASDAQ:BBRY) shows how unpredictable the U.S. legal system can really be. Of course, last week the company won an $815 million arbitration award against Qualcomm, Inc. (NASDAQ:QCOM) regarding a royalty dispute. As a result, BlackBerry stock spiked 14%.

BlackBerry Ltd (BBRY) Stock Needs More Than a Successful Lawsuit

It’s easy to see the lawsuit as a critical inflection point for BlackBerry stock, but proceed with skepticism.

The fact is, the fundamentals for BlackBerry stock are still far from robust; In the latest quarter, revenues plunged by 38% to $286 million and the net loss came to $47 million.

Granted, BBRY is in the midst of a grueling restructuring — involving the transition from hardware to enterprise software. So yes, it is reasonable to expect big-time drops on the top line.

So perhaps the money from the lawsuit will help with the efforts. But then again, BBRY has not been a company constrained by cash, having $1.1 billion (after excluding the long-term debt) in the bank prior to the windfall. It’s also important to note that the company had already indicated that it would reach cash-flow positive by early next year.

In fact, if you take a look back at tech history, there are notable examples of how lawsuits did little to reverse fundamental problems. Just some include Novell and Sun Microsystems, which won substantial antitrust judgements against arch rival Microsoft Corporation (NASDAQ:MSFT).The key for BlackBerry stock is whether the company can effectively leverage its assets to get a chunk of the cybersecurity market.

No doubt, there are some juicy opportunities, such as with mobile devices, autos and even the Internet of Things (Iot).Part of the strategy has involved M&A, such as for Good Technology and QNX. But BBRY also has a long history of software development, especially with its core operating systems and servers.

All in all, there are already signs that the strategy is gaining traction — which has lifted BBRY stock even before the announcement of the lawsuit. In the latest quarter, the software and services business processed 3,532 orders, up 16% on a quarter-over-quarter basis. Some of the marquee customers include Deutsche Post DHL, Nationwide Mutual Insurance, Sutter Health and Mitsubishi UFJ Financial Group.

What’s more, BBRY has continued to show success with its partnerships, which include biggies like China Mobile Ltd. (ADR) (NYSE:CHL) and Vodafone Group Plc (ADR) (NASDAQ:VOD).Despite all this, it could prove difficult to accelerate the growth. Keep in mind that BBRY expects to grow at or above the overall market for software in fiscal 2018.

Then again, the company faces a fiercely competitive market, with rivals like Fortinet Inc (NASDAQ:FTNT), Palo Alto Networks Inc (NYSE:PANW) and Check Point Software Technologies Ltd. (NASDAQ:CHKP). Besides, the BlackBerry brand is certainly far from inspiring. It’s essentially an old one — which got pummeled in the smartphone wars by Apple Inc. (NASDAQ:AAPL) and Samsung. Because of this, BBRY could have a tough time getting the attention of customers.

Bottom Line on BBRY Stock

There’s little doubt that BBRY CEO John Chen has done a great job. He has cut back costs, divested businesses and focused on the right things. It certainly helps that Chen has a standout track record in the tech business, having rebuilt the struggling Sybase and selling it to SAP SE (ADR) (NYSE:SAP) for a hefty $5.8 billion.

But turnarounds take time — and can be choppy. And I think this will be no different with Blackberry stock. Perhaps this is why Wall Street remains muted, with the average price at roughly the same value of the market price. So for the most part, it’s probably best to wait on BlackBerry stock for now.

Tom Taulli runs the InvestorPlace blog IPO Playbook as well as OptionExercise.com, which provides interactive tools & services for employee stock options of pre/post IPO companiesFollow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Tom Taulli is the author of various books. They include Artificial Intelligence Basics and the Robotic Process Automation Handbook. His upcoming book is called Generative AI: How ChatGPT and other AI Tools Will Revolutionize Business.


Article printed from InvestorPlace Media, https://investorplace.com/2017/04/blackberry-ltd-bbry-stock-needs-more-than-a-successful-lawsuit/.

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