BlackBerry Ltd (NASDAQ:BBRY) faces a crucial test when it releases earnings before the market opens June 23. Analysts covering BBRY stock are hoping for a breakeven quarter, but whispering about a small profit, on $264 million in revenue. They are expecting the cost-cutting by CEO John Chen — and old software dressed up in the clothes of enterprise security — to achieve results.
Analysts in Canada, where Blackberry is based, in the Toronto exurb of Waterloo, are particularly tense. The company may have a market cap of just $5.7 billion, but in Canada that’s real money.
Besides, Blackberry is expected to reveal more details about the business this quarter, showing specifically where its cash is coming from. Is the new Blackberry a car infotainment company, an enterprise mobile management outfit, or something else entirely?
Those pounding the table for BBRY stock, up 38% just since the start of April, want answers.
Where the Qualcomm Money Went
Blackberry has been on a quiet spending spree as it fought off Qualcomm, Inc. (NASDAQ:QCOM) in arbitration over royalties, resulting in a $940-million win in April that sent the shares soaring.
Chen has been adapting its 2015 and 2016 acquisitions — AtHoc, Encryption and Good Technology, into its old QNX software to pitch Blackberry as a key solution for mobile fleet management, which would make it an ingredient in autonomous cars.
It has also rolled out its BBM Enterprise Software Development Kit as a service for secure messaging on either iPhones or Android devices. The software, the heart of the old Blackberry phone (of which no one shall speak, henceforth), is being pitched as a way for companies to get control over employees in an age where they all bring their own devices to work.
Blackberry salespeople have been pounding the pavement for the new company for months now; Friday is when we see if their message is gaining traction.
Official vs. Unofficial Views
Officially, analyst views on BBRY stock are not good. Only four of the 20 analysts now following the stock have it rated as a buy, with two stubbornly sticking to a sell rating.
Unofficially, though, on sites like this that small investors read, there is a lot of optimism. They note that the Qualcomm cash gives the company time to execute on its turnaround, and beat back the bears.
Some of the optimists write for InvestorPlace.
Larry Ramer says the company will keep growing no matter what. The Messenger service can be adapted to mobile payments in the developing world, where bandwidth is dear, he notes, giving the company new growth catalysts in fintech. Vince Martin says Blackberry is now a growth stock.
Bottom Line on BBRY Stock
The optimistic view is not held by our Tom Taulli, who last month offered three reasons to be worried about the company. He is especially worried about Blackberry’s dependence on the car business, where it is a mouse amid competitors like Apple Inc. (NASDAQ:AAPL) and Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL).
I have a more fundamental reason for concern. The game of dressing up old software for new markets has been played before, by many companies, and it almost never works. Old software is often built around old technology. It’s like putting a new body on a Volkswagen AG (ADR) (OTCMKTS:VLKAY) Beetle and calling it a sports car.
Underneath it’s still a Beetle, and no one is really fooled.
While I wish the Canadians well, I am not going to be following them into BBRY stock. This is the wrong place in the economic cycle to be taking on speculative business ventures.
Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this article.
